See other Business/Finance Articles
Title: Questions for the Future: Issues that will When the Bills Come Due, Then What?
Source:
Online.WSJ.com
URL Source: http://online.wsj.com/public/articl ... day%255Fjournal%255Fprimary%25
Published: Jul 17, 2005
Author: Kelly K. Spors
Post Date: 2005-07-18 17:45:19 by Kamala
Keywords: Questions, Future:, Issues
Views: 32
Comments: 28
Questions for the Future: Issues that will When the Bills Come Due, Then What? By KELLY K. SPORS July 17, 2005 Thanks to rock-bottom interest rates and easy ways to borrow, consumers have been on an all-out spending spree for several years. Now, though, there are signs that the bills may be piling up too high. The portion of Americans' disposable income devoted to paying off debt hit a record high recently, even though interest rates have stayed at record lows. That could put a financial squeeze on many households if and when long-term interest rates finally start to go up. U.S. consumers are more vulnerable than ever to rate increases because they've taken on more adjustable-rate debt in recent years -- meaning monthly payments fluctuate when interest rates change. Nearly half of all consumer debt and 26% of all mortgage debt is now adjustable, estimates Joe Abate, senior economist at Lehman Brothers. That's a stark change from the early 1980s when nearly all debt had fixed rates. Other estimates peg adjustable-rate debt at closer to 20% of all consumer debt. Adjustable-Rate Crunch "When all these [adjustable-rate] mortgages reset soon, some of these people are going to see their monthly payments rise by a few hundred dollars a month," Mr. Abate says. "That's a real significant bump for all those people complaining now that gas prices have risen over $2 a gallon." And recent data suggest the debt burden on households is growing heavier, despite low interest rates. The "debt service ratio," the Federal Reserve's estimate of the ratio of debt payments to after-tax income, hit 13.4% in the first quarter of this year, an all-time high since the Fed began tracking it in 1980. The financial obligations ratio, which adds automobile lease and rent payments, homeowners insurance and property-tax payments to the debt service ratio, was 18.45% last quarter, near the record high of 18.84% in late 2002. Overall, U.S. consumers now owe roughly $11 trillion, nearly double what they owed a decade ago. The vast majority of that debt growth came from people taking out big mortgages and tapping their escalating home equity. Total household debt grew 11.2% in 2004, the largest year-to-year increase since 1986. "We're still in the midst of this consumer debt binge," says Kathy Bostjancic, U.S. senior economist at Merrill Lynch & Co. As long as the housing boom continues, "it's going to give consumers a false sense of security." Many economists including Ms. Bostjancic predict that if mortgage rates see a noticeable rise from the 6% of recent months, many housing markets will slow and prices will flatline, or even drop in some especially hot markets. Oddly, long-term rates have stayed low despite the Fed's steady short-term rate increases that started last summer -- a phenomenon that Fed Chairman Alan Greenspan recently dubbed a "conundrum." Here's the impact rising rates can have on household finances: A family with a 30-year adjustable-rate mortgage with a 5% interest rate would see its monthly payment jump from $1,074 to $1,468 -- a 37% leap -- if mortgage rates rose to 8%. Couple this with rises in other debt payments such as credit cards, home-equity loans and such, and households may struggle to pay all the bills each month. The rise in payments due could be exacerbated if job growth and incomes don't keep pace. For consumers, this means it's high time to make a serious dent in their debts, especially those with adjustable-rate debts such as many mortgages, home-equity loans and credit cards. While it may not be realistic to pay off some debts entirely (easier said than done), borrowers can at least make more than the minimum payments each month -- and cut back or stop buying on credit. After all, most analysts still think that long-term rates have nowhere to go but up, and that there will be a modest increase by year end. Once rates rise, all the consumers who have overloaded themselves with adjustable-rate debt on mortgages, home-equity loans and credit cards will probably see their minimum monthly payments climb. And if housing prices stop rising, they'll be less able to tap their home equity to help cover the swelling bills. In severe cases, if consumers can no longer afford their monthly payments, this could mean more defaults and foreclosures in some cases. Already, affordability concerns are popping up. A recent analysis of jumbo mortgages, those with loans above $359,650, by Bear Stearns showed that the average initial mortgage payment on mortgages rose to $2,338 in the first quarter of this year, up from $2,060 late last year. It suggests home buyers might be struggling to keep the price of their home low. Consumers who have taken advantage of innovative loan products like interest-only loans also will feel the pinch of rising rates, since those loans require only interest payments early on, no principal, but require heftier payments later on. And that number has risen significantly during the past couple years: About 27% of all new mortgages so far this year (excluding refinancings) were interest-only, according to LoanPerformance, a unit of First American Corp. that tracks 46 million mortgages monthly and provides information to lenders and others in the industry. Only 1.6% of all new mortgages were interest-only in 2001. Much of the debt spree reflects unusual market trends in recent years, particularly the housing boom. Even as the U.S. economy sputtered and jobs fizzled in 2001 and 2002, consumers continued to borrow and spend as they did during the raging 1990s bull market. But as home prices surged and interest rates hit record lows, consumers took out bigger mortgages and started tapping their escalating home equity like a credit card. U.S. regulators kept interest rates low to keep the economy chugging. 'We'll Probably Regret It' "It was a good strategy in that we needed something to boost the economy in the economic downturn," says Dean Baker, founder of the Washington think tank Center for Economic and Policy Research. "But it sets us up for an even worse crash when housing" cools. "In the long term, we'll probably regret it." What's more, consumers' attitude about debt is changing, says Robert D. Manning, a finance professor at Rochester Institute of Technology. While older generations are more debt-averse and cut spending during economic downturns, younger generations rely on debt for spending money. "What we're seeing here is really a deferral of the financial responsibility and consequences," Mr. Manning says. "We may be heading into a very gut-wrenching period."
Post Comment Private Reply Ignore Thread
Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: Kamala, Arete (#0)
I saw a little known fact last year that is vital to understanding what is at the root of the economic malaise this country suffers under. For the first time ever, interest payments exceeded earned income. That is, earned income which comes from production of raw materials or some other consumable goods. What this amounts to is for the first time in the history of the Federal Reserve System, unearned income exceeded earned income. And I'm NOT talking about dividend payments or rents. This is exclusively interest payments, or debt service. When this country embraced the Keynesian hocus pocus and adopted deficit spending and subsidy payments to producers instead of giving those producers fair pay, or parity, they have effectively robbed the nation of income in exactly the same amount that was put out as deficit spending. And whom are the benficiaries of this deficit spending? That is right, the banksters. It certainly is NOT the hard working producers or any of the workmen out there who earn their keep. Only the biggest parasites in history are the ones who benefit by the plunder of the people's wealth. "But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
Keynes did say you needed to pay off the debt.
Welcome to 4, mirage. Could you put this in another context? Also consider that all money is debt. So, how can we pay off debt by using debt? Quite simply, we can't. The solution is to bring the federal levithon back under its limited scope. I think that you may need to do quite a bit more study on this subject to see where the fraud lies. A good place to start is to read Sheldon Emry's Billions for the Bankers, Debts for the People. And another good thing to read is Congressman Louis T. McFadden's speech to Congress in 1934. To see further why this is true, pick up a book from Acres USA, UNFORGIVEN: America's Economic System SOLD for Debt and War. All the while keep in mind that if the country had not listened to the fascists back in the 1920s and 30s, and had simply given the raw material producers their fair pay, we would have a robust and thriving economy to this day. John Maynard Keynes was a shill for the banksters and his plan of creating wealth by deficit spending was flawed and has led only to the destruction of this nation. Keynes was a fraud and so are the free traders who have been influencing and setting the economic policies of this country for decades. The banksters are the worst crooks of all. We do not have enough rope to hang all of the rotten, traitorous scum and vermin who inhabit the environs around Wall Street and other nefarious places.
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
We were still on the gold-exchange standard when Keynes wrote his General Theory back in the 1930s (or so) - so keep that in mind. Keynes thought it was a good idea to borrow and go into debt to stimulate the economy, but he also said that you needed to take the increased tax revenue from the recovery and used it to pay off the debt incurred providing the stimulus. Its in his General Theory if you care to read it. TODAY, yes, money is basically debt being tossed around, but the link severing the dollar from gold was done in the 1970s, not in the 1930s. I've read much about the conspiracies surrounding the Federal Reserve. Do you also know the histories of the First Bank of The United States as well as the Second Bank of The United States? If not, then those are also suggested reading. The Fed is nothing new. There were central banks here in the US before the Federal Reserve came into existance. But, quite simply, if one were to actually follow what Keynes recommended INSTEAD of today's Neo-Keynesian economics, there would be no national debt.
For the first time ever, interest payments exceeded earned income. That is, earned income which comes from production of raw materials or some other consumable goods. What this amounts to is for the first time in the history of the Federal Reserve System, unearned income exceeded earned income. And I'm NOT talking about dividend payments or rents. This is exclusively interest payments, or debt service. Would you be so kind as to link to a source for this information? Because if true, then that is very useful and important fact, and I'd like to be able to cite a reference before sharing this story with others. Thanks in advance.
U.S. consumers now owe roughly $11 trillion
#2. To: BTP Holdings (#1)
When this country embraced the Keynesian hocus pocus and adopted deficit spending
#3. To: mirage (#2)
Keynes did say you needed to pay off the debt.
#4. To: BTP Holdings (#3)
#5. To: BTP Holdings (#1)
I saw a little known fact last year that is vital to understanding what is at the root of the economic malaise this country suffers under.
 | Gold and silver are real money, paper is but a promise. |
#6. To: Elliott Jackalope (#5)
That was from a print source I have here. I will have to look it up, but it is taken from official figures. It may take a little time to find it. In the mean time, you may find this of interest. http://www.normbook.homestead.com
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#7. To: mirage (#4)
I am well aware of the things you state above concerning the history of banking in the U.S. Keynes was DEAD WRONG about the borrowing routine. And to prove it you should take a look at this http://www.normbook.homestead.com The information also shown in the book Unforgiven is much ignored. If you were as aware of the history of banking and economics as you claim, you would not have said such things to me as you have up to now. But, then, maybe you have been exposed to the standard thought on these subjects. So, it would not be surprising that you should embrace what has been shown to be folly in the much ignored work that I have shown you. What I have given you is some vital information that will turn your thinking and beliefs upside down. Now, it is entirely up to you if you choose to use it or even accept it as the truth that it is. It is all there if you care to look, and it is NOT in the nature of a theory as Keynes has laid out. It is all proven and factual with charts and graphs and other extensive citations over a period covering most of the last century. Most of all, have some fun at this. And remember Morpheus, "I never said it would be easy, only the truth." The red pill or the blue pill, it is your choice. ;^)
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#8. To: BTP Holdings (#7)
I absolutely am! Though, it is still a point of fact that Keynes stated that the debt incurred while providing stimulus should be paid off during the recovery with the increased tax reciepts - now, the fact that nobody has ever bothered to do this is another matter entirely! That is the sole point that I'm trying to make. While Keynes is rightfully villified for opening the door to the chaos we're in, he needs to be given credit for attempting to recommend how to close things out. Hence, we live in an era of Neo-Keynesian economics, not true Keynesian economics. A cursory look at your suggested site simply verifies what has always been true. Wealth is not a pile of paper. It is resources and owning the means of production and distribution. Even my high school economics course stressed that.
have some fun at this
#9. To: BTP Holdings (#1)
And that's because the "banksters" had a gun to the heads of the borrowers or they wouldn't have taken on all that debt. Get real.
That is right, the banksters ...
#10. To: mirage (#8)
LOL That's good! If you look closer at the material I pointed you toward you will find that the borrowing to stimulate growth is unnecessary since payment of parity to the raw material producers is sufficient to drive the economic engine. (Get the book if you can. It's $25 and well worth it.) So Keynes really had it all wrong to begin with. He was working with a flawed premise and the information you will see proves this out. (We could go into the problems of overproduction within the capitalist system, but that is for another thread. It is all related though and what it amounts to is that the capitalist system was finished in the 20s.) Hence, Keynes simply opened the door to the current economic abuses and tyranny we are experiencing. And car loads of establishment economists have added to the mayhem year after year by repeating the same disastrous policies. Of course the free traders have multiplied the effect many times over for the sake of cheap resources and cheap labor and increased profits. The springboard to this was during Eisenhower's administration when they opted to scrap parity to agriculture. Ike's brother, Milton, was key to poisoning Ike's mind on this issue and we see the results after his Ag Sec'y announced, "We are tired of mollycoddling these farmers," just prior to the passing of the new Ag Bill that reduced parity to 60%. The depression of the late 50s is living proof of the results of this folly, and Ike was warned beforehand of the consequences of that action just a few short years down the road. The prediction came true, much to our lament. And if we exmine the loss in national income we see it coincides exactly with the amount of the debt for that period.
I absolutely am! Though, it is still a point of fact that Keynes stated that the debt incurred while providing stimulus should be paid off during the recovery with the increased tax reciepts - now, the fact that nobody has ever bothered to do this is another matter entirely!
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#11. To: Phaedrus (#9)
You don't say? Would you like to elaborate on this? I would like you to show me which bankers had a gun to the head of any of the Congressmen or Senators or Presidents. Should we count Lincoln as having had a gun to his head? John Wilkes Booth was an agent of the Rothschilds. Go ahead, get out on that limb a little further before I saw it off behind you. ROTFLOL!
And that's because the "banksters" had a gun to the heads of the borrowers or they wouldn't have taken on all that debt. Get real.
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#12. To: BTP Holdings (#10)
Well, now we're getting into philosophical differences. Direct cash subsidies have been and ever shall be quite evil as they grow Government, which is an evil. So, you're advocating additional Government meddling?
#13. To: BTP Holdings (#11)
You don't say? Would you like to elaborate on this? Seems pretty clear to me. You're a legend in your own mind.
And that's because the "banksters" had a gun to the heads of the borrowers or they wouldn't have taken on all that debt. Get real.
#14. To: mirage (#12)
Not at all, just the opposite. I'm in favor of Constitutional government. They are waaaaaay out of control. You need to look into that book, Unforgiven. It is quite a good history of how we have gotten to where we are. And the online book from NORM economics is even better. There is still a solution, but as time marches on, we get further toward the precipice.
So, you're advocating additional Government meddling?
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#15. To: Phaedrus (#13)
And you're a BOZO. BYE-BYE!
You're a legend in your own mind.
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#16. To: BTP Holdings (#14)
IMO, the real solution is for people to live within their means. The online book is interesting and I will have to examine it in more detail, but keep in mind that a debtor becomes one of his own free will. Nobody forces anyone to take out a mortgage or run up the credit cards. Now, as to the precipice - assume all persons in the country go bankrupt, the FedGov defaults, and, as a result, the currency becomes worthless. The bankers who supposedly own everything take possession of the entire country - and then - what? There is no money to pay soldiers or police with. How would anything be enforced? Therein lies the problem with most "OMG, we're all owned by someone else!" conspiracy theories. There have to be willing participants in the scheme and - assuming there is a collapse - then what? We're an armed society. Does anyone actually think that in a total economic collapse there won't be a lot of shooting going on -- and that the targets won't be "those who people think brought it upon us" ?
There is still a solution, but as time marches on, we get further toward the precipice.
#17. To: mirage (#16)
Oh, Lord, I know you're right on this. It is the easy money false paradigm, and there are several of them in operation in our own little matrix. This is a deep subject and we could go on for hours. No one forces them to sign, but we suffer under a presumption, due to the bankruptcy of the U.S., that we are all debtors. And this again returns to the signing on the dotted line. It is a bit more complex than this, but I have researched it and read up on it quite extensively. The people have been bamboozled, and if they wake up before it is too late, we have a chance to stop the hemorrhage. I like this quote from John Adams, "All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation." Therein lies the problem with most "OMG, we're all owned by someone else!" conspiracy theories. There have to be willing participants in the scheme and - assuming there is a collapse - then what? We're an armed society. Does anyone actually think that in a total economic collapse there won't be a lot of shooting going on -- and that the targets won't be "those who people think brought it upon us" ? It's likely that most anyone in a position of authority will be a target, especially when you consider the existence of the heavily armed gangs that have been allowed to flourish in the big cities and elsewhere. I much prefer a short rope and a tall tree on a midnight ride. It's quiet and less messy. Don't forget, the Bilderbergers want to eliminate 3 billion people in the world, and 100 million of them right here in the USA.
IMO, the real solution is for people to live within their means.
keep in mind that a debtor becomes one of his own free will. Nobody forces anyone to take out a mortgage or run up the credit cards.
Now, as to the precipice - assume all persons in the country go bankrupt, the FedGov defaults, and, as a result, the currency becomes worthless. The bankers who supposedly own everything take possession of the entire country - and then - what? There is no money to pay soldiers or police with. How would anything be enforced?
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#18. To: BTP Holdings (#17)
I am speechless before such penetrating insights.
Don't forget, the Bilderbergers want to eliminate 3 billion people in the world, and 100 million of them right here in the USA.
#19. To: BTP Holdings (#17)
You are my hero and my role model.
#20. To: BTP Holdings (#17)
I've read about the so-called Bankruptcy of the United States myself. Has nobody ever heard of Argentina? They seem to be getting away with it. After all, they told ALL their foreign creditors they will be getting 10c on the dollar OR NOTHING. Where is the invasion to take possession of that country? So, let's assume the nation is in recievership and we're being ruled directly by the International Banking Cartel. What is their goal and what are their aims? As for the Bilderbergers wishing to reduce the world population, I wish them luck. Since it has more than doubled since 1980, they seem to be quite ineffective in their efforts. Actually, I'd say they're incompetent given the results so far and that this so-called "conspiracy" has been around for ages...
#21. To: mirage (#20)
As for the Bilderbergers wishing to reduce the world population, I wish them luck. Since it has more than doubled since 1980, they seem to be quite ineffective in their efforts. Actually, I'd say they're incompetent given the results so far and that this so-called "conspiracy" has been around for ages... There are so many involved annd making a killing themselves that it is no problem to keep this country under control. The only reason they have not foreclosed completely is that we have too many guns. I'm not sure what, if anything, you really know about Bilderberg. They are a most interesting bunch. And there is no question they have a direct, or indirect influence on world affairs. I do not have a list of things that can be attribited to them handy, but I could get one. I have seen a synopsis of what has transpired at their annual meetings, and the agenda. And then seen, in hindsight mind you, the results later on. It is not so much a conspiracy as it is a definite plan, which is evolving in small part because of world events which they do not have a handle on. Their goal is to implement global government, with them as masters and the rest of us as slaves on the global plantation. There is a ton of info on the web about Bilderberg and even a few books. There are a few reporters who have dogged them and given them fits over the years. And don't forget, the international bankers are part and parcel of these wretched creatures. There is much information which cannot easily be entered into here since it would be too lengthy. I am still learning myself and there are many facets to this all. It even goes back into the early 20th century (when was the British Round Table started?) and much of it revelved around the schism between the European and American versions of fascism. We see this in much of the writings of Francis Parker Yockey and the activities of the post war Fascist Internationale. This is all very complex and I wish I had the time to go further into it. As for Bilderberg, check this and this for the most recent news, including a story I just posted today.
So, let's assume the nation is in recievership and we're being ruled directly by the International Banking Cartel. What is their goal and what are their aims?
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#22. To: BTP Holdings (#21)
Again, I say this - so they foreclose on the country. Then what? That is where all the conspiracy theories start to fall apart. They own the country. So what? They are few, we are many. Your answer is.....? There have always been groups who want to take control and influence things. Some are successful, some are not so successful. Some are exposed and driven underground (see: Adam Weishaupt)... Ever wonder why an invasion of China never succeeded? True, the Mongols took control of the imperium there, but its the bureaucrats who have always run everything. It matters not who is in power. The public servants run the show. Just look up Confucious...
#23. To: mirage (#22)
I think you may have answered your own question. There are far too many who benefit from the current fraudulent paradigm to ever turn against it. What do you think will happen when and if the PTB unleash the U.N. troops who are already here? And considering that most of our military is out of the country? Enough for now. I'm off to bed.
but its the bureaucrats who have always run everything. It matters not who is in power. The public servants run the show.
"But what is Hope? Nothing but the paint on the face of Existence; the least touch of truth rubs it off, and then we see what a hollow-cheeked harlot we have got hold of." Lord Byron
#24. To: Kamala, *unUsual Suspects* (#0)
Ping to the unUsual Suspects Richard W.
#25. To: BTP Holdings (#23)
I seriously doubt that will ever happen. There are more than enough hunting rifles -- even a .22LR with a Tasco 3x9 scope is enough and it is small enough to get into even the smallest nooks and crannies. Besides, do you REALLY think people would go along with that? If you think there is a problem with terrorism in the world NOW - just wait for THAT one to get unleashed. Bear in mind, UN troops do not know the lay of the land. High School kids do. Ponder that one for a while.
What do you think will happen when and if the PTB unleash the U.N. troops who are already here?
#26. To: mirage (#25)
I've read that one of the reasons the Nazis didn't bother to invade Switzerland during WWII was that the adult male citizenry, all comprising the militia, was so well armed. I suspect that any potential foreign U.S. invader would think twice for the same reason. There are well over 200 million firearms in private hands here and the average, scoped deer rifle is comparable in quality to a WWII sniper rifle. Or maybe we could just smother the invaders with American flags and "Support Our Troops" plastic yellow ribbons. There are far more of those than guns. Joe Six still loves America.
#27. To: Phaedrus (#26)
They were also drilled and well coordinated. I'm not sure how well our suburban Joe Sixes would do. Also Switzerland has mountains even in the north that would make tank attack difficult. They have tank trapping steel beams to supplement the natural terrain. Many of their WWII defenses were left over from WWI and many still work today.
I've read that one of the reasons the Nazis didn't bother to invade Switzerland during WWII was that the adult male citizenry, all comprising the militia, was so well armed.
(If you see flies at the entrance to the burrow, the ground hog is probably inside)
#28. To: Phaedrus (#26)
At least until someone offers him a Better Deal he does.
Joe Six still loves America.
Top • Page Up • Full Thread • Page Down • Bottom/Latest