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The Story Of America's Debt In 6 Easy Graphics
Despite incessant pundit parroting of the "deleveraging households" meme, America is and probably always will be, addicted to debt. If you need proof, have a look at the latest statistics on non-mortgage debt, which, thanks to America’s twin trillion-dollar bubbles, recently soared to its highest level in a decade. To wit, from HousingWire, citing Black Knight Financial:
What we’ve found is that mortgage holders today are carrying more non-mortgage debt than at any point in the past 10 years, with an average of $25,000 per borrower. That’s $1,400 more on average than one year ago, and nearly $2,600 more than in 2011. The primary driver of this increase is a rise in auto-related debt, which accounted for 81% of the overall non-mortgage debt increase over the past four years [and] student loan debt [which] is at all-time high.
Now, Pew is out with a new study entitled "The Complex Story Of American Debt" and as you might have imagined, the non-profit found that the past three decades have witnessed an unprecedented shift in Americans’ propensity to leverage household balance sheets. This tendency has not been accompanied by a concurrent and proportional increase in household income. Here is the story of America’s debt addiction in six graphics:
More, from Pew:
One of the biggest shifts in American families’ balance sheets over the past 30 years has been the growing use of credit and households’ subsequent indebtedness. In the years leading up to the Great Recession, the average household at the middle of the wealth ladder more than doubled its mortgage debt. Although Americans’ debt has decreased since then, housing—which still is the largest liability for most households—and other debt remain higher than they were in the 1990s, and student loan obligations have continued to grow.
And this rise in debt has not corresponded to a similar increase in household income. Debt is particularly problematic for low-income households, whose liabilities grew far faster than their income in the aftermath of the recession: Their debt was equal to just one-fifth of their income in 2007, but that proportion had ballooned to half by 2013. Even middle-wealth households held over $7,000 more debt, on average, in 2013 than in 2001 and previous years.
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“Freuchen tells how one day, after coming home hungry from an unsuccessful walrus-hunting expedition, he found one of the successful hunters dropping off several hundred pounds of meat. He thanked him profusely. The man objected indignantly:
... The refusal to calculate credits and debits can be found throughout the anthropological literature on egalitarian hunting societies. Rather than seeing himself as human because he could make economic calculations, the hunter insisted that being truly human meant refusing to make such calculations, refusing to measure or remember who had given what to whom, for the precise reason that doing so would inevitably create a world where we began "comparing power with power, measuring, calculating" and reducing each other to slaves or dogs through debt. It's not that he, like untold millions of similar egalitarian spirits throughout history, was unaware that humans have a propensity to calculate. If he wasn't aware of it, he could not have said what he did. Of course we have a propensity to calculate. We have all sorts of propensities. In any real-life situation, we have propensities that drive us in several different contradictory directions simultaneously. No one is more real than any other. The real question is which we take as the foundation of our humanity, and therefore, make the basis of our civilization.”
- David Graeber, Debt: The First 5,000 Years
One of my main goals right now (and the past 5 years): get out of debt ASAP and never take another loan again. Once we all do this, the bankers will lose their grip over us!
"...but debt is the money of slaves" - Norm Franz
Hedonic quality adjustments and substitution have allowed the government to under-report the true inflation rate for years. Due to decades long stagnant wages and the rising cost of essential items like food, rent and healthcare, the middle class has been unable to maintain its purchasing power. The only way the average family has been able to live the "American Dream" has been through the accumulation of debt.
"The only way the average family has been able to live the "American Dream" has been through the accumulation of debt."
100% by design, of course. The bankers can make money holding your savings, but they make exponentially more collecting interest on your debt. Not to mention that people in debt have much less power over their lives than people with savings.
I really do not think one needs to be a conspiracy theorist to believe that bankers have caused their government to make policy choices that decrease wages and increase the cost of living for workers. If anything, it would take a crazy person to believe otherwise given the obvious math.
Logged in just to up this comment!
Logged in just to up this comment!
I'm not normally a bible quoter but one verse that is permanently burned into my brain from my youth is:
the rich ruleth over the poor and the borrower becomes the slave of the lender - proverbs 22:7
my life's expereinces have led me to question/rethink a lot of what I was taught in rural southern (us) churches but this is one in which my certaintly has only grown with time.
Exceptional.
+trader1, Graeber's thesis is interesting. The first thing I noticed from your quote was that, the way you're interpreting it undermines his MAIN ideas about how money originally came to be. He said money came to be, not as a unit of value to replace barter, but as a measurement for credit.
In your quote, Freuchen would have reciprocated to the hunter that gave him the meat with a coin; a marker that represented a debt he owed. Worth X-pounds of meat.
In that case, I'm not sure how his account of the origin of money could comport with "the refusal to calculate credits and debits." I'm sure it's just context of each idea is what I'm missing - or the story that links the two.
Robert Murphy has written a critique of Graeber's account if you're interested:
http://www.theamericanconservative.com/articles/origin-of-the-specie/
http://consultingbyrpm.com/blog/2012/04/murphy-vs.-graeber-on-money-roun...
This is the fundamental difference between a subsistence society and one with surplus....you don't get the silos, walls, and armies until you have a surplus.
Credit eventually destroys all great nations
“… the fact that it [the US] can, at will, drop bombs with only a few hours’ notice, at absolutely any point on the surface of the planet. No other government has ever had anything remotely like this sort of capacity. In fact, a case could well be made that it is this very power that holds the entire world monetary system, organized around the dollar, together”
- David Graeber, Debt: The First 5,000 Years
That quote is the razors edge of today's world. Everyone that's paying attention knows the dollar is worthless. Sure, maybe slightly less worthless than the other fiat around the globe, but still worthless.
How far is the military willing to go to force humans to say the dollar has value?
Graeber is *gasp* an anarchist! ... to bad he's not an anarcho-capitalist.
Excellent article. I did not know the breakdown and it's fascinating but seriously worrisome how debt/extensive the debt is.
It worries me because 1) people are borrowing far too much for consumption (non-productive) and 2) Obama will try (and probably succeed) in getting a lot of the student loan money forgiven, which just encourages more of the same.
People like to borrow and then think they look like big shots, but when loans are available to anyone for a new car a new car loses its prestige. It used to be that when a person had a new car that was really something, they had saved the money to buy it. Now it just means that the person signing the paper had a pulse.
In the end pulling demand (or consumption) from the future never has a happy ending.
glen, people like to borrow and calculate they will not have to pay back. They have seen trillions in bad debt forgiven with little accountability so figure, "Why not me too?!"
It's the worse moral hazard I've ever seen in merika and it's another bad sign of further cultural decline.
Moral hazard implies a certain morality that is being jeopardized. Other terms that work are:
slippery slope
co-dependency
aiding and abetting
falling off the wagon
shooting up the junkie
decadence
decline and fall
infantilization
The charts are averages for "households" with each type of debt. How many "households"/ttl is that? I'm not a factor in this porn.
Wow. We're in better shape than I thought. It took me a while to understand the chart but if I understand it correctly 20% of households have NO DEBT? No mortgage, no auto loan, no student loan, no credit card debt? 20%? Really?
I'm one of them. It's an old school thing. Grandparents went thru the great depression, parents grew up in poverty and only barely moved up to being factory workers, managed to retire on fixed incomes when pensions were still a thing.
"Eat everything on your plate" "You can't get a car until you can afford insurance" "You're eighteen now, move out" "Pay extra deposit to bring the monthly down, then pay extra each month"
All things you don't hear anymore.
Congrats! All I can claim is a positive net worth. :-)
I thought that I was the only one !
Wish the report told me how I can find others of my own kind.
This is interesting. When Generation X came of age, they were hit with the Regan/Thatcher trickle down economy combined with an outright attack on public benefits and pensions. If you look at the numbers, you find that although Generation X earns significantly more than either the Boomers or the Millenials, they feel the most insecure. They have comparable net worth to the Boomers and comparable debt, and unlike the Boomers who during their peak earning years paid mortgages in the 14-22%, Generation X enjoys mortgage rates at unheard of levels, subsidized by the financial repression that is being layed on the Silent Generation and the Boomers.
So why is this? Well, I posulate that two things have occured. One, Gen X grew up during a conservative rennaisance period where it became fashionable to attack public pensions, public benefits, unions and taxes, and even though only 25% of the population in Canada and the US now have access to workplace pensions, the attack continues. Nothing like cutting your own throat.
Clearly, the smartest generation were the Silent Generation. They have the highest net worth and the lowest debt since those that grew up in the dirty thirties not only knew about the cost of debt, but likely didn't have access to it.
This intergenerational attack has been orchestrated by the conservative elements in our societies, who, while wishing to encumber both Gen X and the Millenials with ever increasing amounts of debt, are unwilling to compensate them properly or provide the type of beneits (i.e. pensions) that would create a much more harmonius society. Better the conservatives think, to draint the wealth from the generations that ignored their traps and make sure everyone is absolutely broke and highly indebted.
Conservative elements? I know there is a lot of definitional hogwash out there that we are using to label those "groups" we do not agree with, but really. Conservative elements orchestrating debt and encumberment? Exactly what conservative PERSONS can you point to that fit this description. Of the people I know, who actually claim the label "conservative", none believe in debt, for themselves or anyone else. And many are self employed and invest in themselves rather than playing the markets or relying on interest income.
Ronald Reagan?
Following the chart pattern, looks like the Fannie, Freddie, and Sallie did most of the orchestrating behind housing and education debt. Aint it great when .govtards and banksters conspire to fuck up America?
Oh go fuck yourself you boomer moron; Gen X weren't the ones taking out HELOCs, didn't vote for the moronic goobers that started this descent, and sure as fuck bear less culpability for the current state of politics than your self-aggrandizing, viagra and prozac popping, excuse for a fucking generation.
You and the silent generation"paid 14%" on principal that was a tiny fraction of what Gen Xers have to pony up now, had job security like the world has never seen, and benefited from WWII flattening the rest of the planet so your sorry asses could even attempt to compete on the world stage.
Gen X is insecure because their income streams are insecure...thanks to fucking assholes like you and your long history of voting for bread and circuses while the economy was hollowed out by financialization.
OMG! "The Debt Monster Targets White Households!" "White Households unfairly harmed more by debt".
Debt is a choice. Nobody puts a gun to your head. They just make it painless and easy.
Nobody puts a gun to your head, but when your choice is between your kid starving and your kid eating with credit money (or between not getting to work and getting to work with credit money, if you'd rather), most will choose the latter despite the consequences.
You can only abuse as much credit as you can receive; white people on average get more rope.
Summary: Debt is quite irresponsible and self-destructive. But we do it anyway. Game over.
We have:
Mortgage Debt 0
Credit Card Debt 0
Car Debt 0
Education Debt 0
Total Debt 0
That means we only have assets now.
I have not used credit cards since 1999, after seeing what the ex-wife did with them (and to me with them).
We don't make much anymore, but we don't need much to live on.
It is a good feeling to be without debt ... kinda like you can breathe again.
Same here and yes it does feel good.
Awesome! Having no debt was one of the factors allowing me to retire at age 54. Life is awesome.
Debt is a big weight for sure, but I also look at liability, a more general term, as the real issue. Owning things, things that exceed our needs become liabilities as they require maintenance, taxes, fuel etc. As a small business owner I see all types of liabilities beyond debt. For me the biggest is the concern always in the back of my mind that somehow, someday, government will come to my door claiming I am not compliant with some inane rule or law that I have never heard of, or an audit or virtually any number of issues that could take what I think is a net positive position to one of major legal and financial implications negative in an instant. And even taking government out of the mix is lawsuits, liabilities for every employee I might have had or customer I might have served...or not served.
I don't want to be a crybaby about it. I point it out because I believe EVERYTHING is a response to incentives...positive and negative, and I believe I am far from the only one out there with these concerns, and THAT is a considerable and growing weight burdening our economy. It is one thing to worry about simply inefficient and stupid systems, but when you consider their growing profit motives and punitive ideologies, I think it is quickly becoming unbearable and will drive us into collapse even faster and deeper than debt.
Debt can be written off, discharged, but fear of an omnipotent starving and indifferent beast that our government has become can stay with us for generations.
I hear this one all the time, usually as "when TSHTF the government will send tax rates thru the roof". I haven't come up with a way around it, other than not complying and "you can have it when you pry it from my cold dead fingers".
Any ideas?
Sixth Attempt to post.
Oldwood- You need to incorpoate. S-Corp is excellent just play the game (don't co-mingle funds, annual meeting minutes, etc.) The tax advantages are great. I do this all theme for people. The cannot pierce the veil of a corporation if you act as one, therefore protecting all personal assets from lawsuits.
You never know what the .gov will do. That is the problem for business and economy. I don't have children, good or bad, so i need not worry about generational wealth. If you to, look into trusts, they are currently untouchable.
All i can say is follow the actions of these corrupt government "things" that make the rules. They will protect their own assets as best as possible. That is where the S-corp came from and as calls to attack it started increasing under Odumb@$$ , it hasn't gone too far yet.
Early out at 55 for me....They even incentivized me. lol, like they needed to.
Good riddance.
i took a 66% pay cut and it was worth every bit of it just to get out
American Nightmare -behaving well and working hard but barely getting by.
Well pretty God damned naturally Americans are in debt! Anyone with even a cursory knowledge of the price/demand curve know that when price drops demand raises. Today with the price of debt near zero, demand must therefore be close to infinite.
The difference between debt and stuff, is that you keep paying for debt, and you only pay for stuff once, (sometimes with debt). When interest rate normalize, and they have to at some time, the consumer, government and businesses in deep debt will default. That will trigger a cascade of events much like 2008.
People in power are incapable of learning.
I am retired at age 62 (just turned 70) and am debt free. I made a lot of financial decisions during my working years that raised eyebrows for a manager. Early on my wife and I decided we had to live modestly even though our income was higher than average.
I bought a one story ranch that fit my wife and I for retirement and paid it off in 15 years (others are still paying for half empty mega-mansions). I drive vehicles for 10 years or more and still drive 2000 Honda CRV (others thought I should buy a caddy). Bought a small cottage (600 square feet) on a small lake 6 hours from the big city and paid it off in 15 years (others bough fancy timeshares they hardly use). I maximized my wife’s and my retirement contributions starting at age 47 (others spent on the moment and forgot about retirement).
Well got to go. Packing to go to the cottage to swim, fish and watch the sunrises until after labor day...
Isnt this the story of the American Econmy? If all those people started saving, and paying off debt the whole economy would crash.