Monday, September 22, 2008

Debt Issues

How bad is the individual debt right now? Pretty bad even before the Wall Street bailout has started. Here are some stats on personal debt right now from a Bloomberg article titled Five Financial Truths Defy Wall Street Madness: John F. Wasik. Lets take a look -

The institutional-debt firestorm and credit crisis has raged through world financial markets with a vengeance and no one knows when or how it will end. While the U.S. Treasury and legislators have announced a temporary plan to insure money-market funds and buy mortgage securities, it's unclear whether this will curb Wall Street's fears. Has consumer debt become the latest flash point?

As the economic reckoning continues, some 10 million Americans have filed for bankruptcy since 2000. One in seven families is dealing with a debt collector. In the past two years, more than 3.5 million have received foreclosure notices.

The bacchanal was enormous: Some $1.2 trillion in home equity was borrowed against from 2002 to 2007, says the public- policy group Demos in New York. That debt was created to largely cover other obligations such as credit-card bills, which total almost $1 trillion or $17,000 per household for those carrying a balance, according to the Federal Reserve Board.

We have become a nation consumed by debt. It seems like the only we are good at producing and exporting lately. Last week we wrote about the craziness that got us into this mess - the thought that buying and reselling the same properties for ever increasing amounts would help us. It makes as little sense as the ever changing government proposed bailout.

The Wall Street bailout is all about debt. Bad debt. And we are supposed to once again in the magical trickle down theory. The government - well not the actual government, one person the Secretary of the Treasury - wants to be granted unlimited power with unlimited funds having no oversight to bail out Wall Street. No Strings. No Oversight. Just give them the money to those who "need" it and leave them alone. Everything will be alright. Trust the people who got us into this mess to get us out. No time for evaluation. No time for input by economists. Do not even bother to ask Roubini or Krugman who have been correct about everything for advice. There is no time. Just give unlimited taxpayer funds to the gurus of high finance and everything will be OK.

Trust the ones who drove us into the ditch to get us out? Isn't there a chance they will drive us off a cliff instead?

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