Federal Reserve Board numbers on consumer credit debt:
**Though it is not explicit, I believe these figures are contemporaneous; i.e., the 1992 figures are in 1992 dollars.
1992 - $0.81 Trillion
2000 - $1.72 Trillion
2008 - $2.57 Trillion
These totals include credit cards, auto loans, and other non-mortgage private debt. I'm still hunting down mortgage debt numbers.
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
23 January, 2009
U.S. Debt
Just a little more on debt, as promised.
**All figures in A.D. 2000 dollars.
Our public debt, courtesy of the U.S. Treasury:
Jan. 22, 1993 - $5.14 TRILLION (4.18 TRILLION in 1993 dollars)
Jan. 22, 2001 - $5.73 TRILLION
Jan. 21, 2009 - $8.71 TRILLION (10.63 TRILLION in 2008 dollars)
Our Gross National Product, courtesy of the Bureau for Economic Analysis:
1992 - $7.34 TRILLION
2000 - $9.89 TRILLION (34% growth since 1992)
2008 - $11.70 TRILLION (18% growth since 2000)
Please note: the figures from Quarter IV of 2008 are not yet in. I arrived at a total for 2008 by averaging the first three quarters and adding that "average quarter" to the total. It is very likely that the resulting GDP figure for 2008 is too high, since Q IV is widely expected to show a sharp decline.
Public Debt as a percentage of GDP:
1993 - 70.0%
2001 - 57.9%
2009 - 74.4%
... And this only covers public debt. I shudder to think about what private debt numbers are going to look like.
**All figures in A.D. 2000 dollars.
Our public debt, courtesy of the U.S. Treasury:
Jan. 22, 1993 - $5.14 TRILLION (4.18 TRILLION in 1993 dollars)
Jan. 22, 2001 - $5.73 TRILLION
Jan. 21, 2009 - $8.71 TRILLION (10.63 TRILLION in 2008 dollars)
Our Gross National Product, courtesy of the Bureau for Economic Analysis:
1992 - $7.34 TRILLION
2000 - $9.89 TRILLION (34% growth since 1992)
2008 - $11.70 TRILLION (18% growth since 2000)
Please note: the figures from Quarter IV of 2008 are not yet in. I arrived at a total for 2008 by averaging the first three quarters and adding that "average quarter" to the total. It is very likely that the resulting GDP figure for 2008 is too high, since Q IV is widely expected to show a sharp decline.
Public Debt as a percentage of GDP:
1993 - 70.0%
2001 - 57.9%
2009 - 74.4%
... And this only covers public debt. I shudder to think about what private debt numbers are going to look like.
Credit and Economics
Full disclosure: I am not an economist.
I do dabble in economic theory, but I am not trained as an economist. Despite this lack of training (or perhaps because of it), I have noticed something about our current economic crisis that no one seems to be discussing.
We've got too much debt.
Both as a nation and as families, we carry far too much debt. Over the last half-century, our access to and use of debt has accounted for far more growth in our Gross Domestic Product than actual wealth.* Put bluntly and simply, Americans have collectively been buying everything on credit cards for decades, while our actual wealth has barely kept up with inflation.
Nowhere was this more evident than in the housing market. Housing costs soared throughout the last twenty years, as finance gurus found more and more ways to expand the public's access to credit. While I am an advocate for people owning their own homes, things eventually got to a point known clinically as "silly."
When people with practically no income and no savings can buy a $200,000 home at 0% down, things are not going to go well. The traditional down payment of 20% did two incredibly important things:
1. It ensured that people buying homes had a significant stake in making the mortgage payment. If they failed to do so, after all, they would lose the thousands of dollars they had invested in their homes.
2. It kept housing prices grounded. Simple math: if a house costs $200,000, you need $40,000 to get started with it. If you don't have $40,000, you don't buy the house. If no one has $40,000, the price of the house falls until someone can afford the down payment.
Our current method of buying not only houses but practically everything on easy credit makes our economy into little more than a speculative crap shoot. Nothing is actually worth the price asked. No one is sure what actual values are, because easy credit has bent the whole system out of whack.
This is why I fundamentally disagree with the "bailout." I understand that trillions of dollars are tied up in the financial markets, and that losses will be devastating; but it will be worse if we prolong this correction. The markets are broken. The government should let them fail, and work to pick up the pieces.
Let the markets become grounded in actual wealth again.
I promise, it will work out far better in the long run than propping up a broken system.
More to come, as I pull more hard figures about debt and consumption.
*By actual wealth, I mean real income from employment or profit from business.
I do dabble in economic theory, but I am not trained as an economist. Despite this lack of training (or perhaps because of it), I have noticed something about our current economic crisis that no one seems to be discussing.
We've got too much debt.
Both as a nation and as families, we carry far too much debt. Over the last half-century, our access to and use of debt has accounted for far more growth in our Gross Domestic Product than actual wealth.* Put bluntly and simply, Americans have collectively been buying everything on credit cards for decades, while our actual wealth has barely kept up with inflation.
Nowhere was this more evident than in the housing market. Housing costs soared throughout the last twenty years, as finance gurus found more and more ways to expand the public's access to credit. While I am an advocate for people owning their own homes, things eventually got to a point known clinically as "silly."
When people with practically no income and no savings can buy a $200,000 home at 0% down, things are not going to go well. The traditional down payment of 20% did two incredibly important things:
1. It ensured that people buying homes had a significant stake in making the mortgage payment. If they failed to do so, after all, they would lose the thousands of dollars they had invested in their homes.
2. It kept housing prices grounded. Simple math: if a house costs $200,000, you need $40,000 to get started with it. If you don't have $40,000, you don't buy the house. If no one has $40,000, the price of the house falls until someone can afford the down payment.
Our current method of buying not only houses but practically everything on easy credit makes our economy into little more than a speculative crap shoot. Nothing is actually worth the price asked. No one is sure what actual values are, because easy credit has bent the whole system out of whack.
This is why I fundamentally disagree with the "bailout." I understand that trillions of dollars are tied up in the financial markets, and that losses will be devastating; but it will be worse if we prolong this correction. The markets are broken. The government should let them fail, and work to pick up the pieces.
Let the markets become grounded in actual wealth again.
I promise, it will work out far better in the long run than propping up a broken system.
More to come, as I pull more hard figures about debt and consumption.
*By actual wealth, I mean real income from employment or profit from business.
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