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You would rather look at a piece of the pie instead of the whole thing. When you begin to say oh we are only going to look at this data, because if we include all the data it changes the outcome...
Stop distorting what I said, I never suggested such a thing. I stated clearly why the increase in household debt is misleading, namely that the home ownership rate has increased over 20% since then. More people owning homes is not bad for the economy, yet it would sufficiently increase the household debt-to-GDP ratio. Most of the increase from the 50's throughout the 90's is likely attributable to this single issue! Consumer debt is going to tell much more about people's spending than household debt.
The situation is not as dramatic as you gloomers want to make it look, but I guess if you only look at linear graphs this is the impression one walks away with.
Stop distorting what I said, I never suggested such a thing. I stated clearly why the increase in household debt is misleading, namely that the home ownership rate has increased over 20% since then. More people owning homes is not bad for the economy, yet it would sufficiently increase the household debt-to-GDP ratio. Most of the increase from the 50's throughout the 90's is likely attributable to this single issue! Consumer debt is going to tell much more about people's spending than household debt.
The situation is not as dramatic as you gloomers want to make it look, but I guess if you only look at linear graphs this is the impression one walks away with.
Let’s see more people owning homes is not bad for the economy, really, gee thanks for clearing that one up. I was under the impression that the economic collapse was caused by people going too far in debt to buy houses they could not afford and then rolling most of their debt from credit cards, furniture, auto purchases, and vacations into their mortgages. Then there were the millions of people who re-financed their homes at several times what they originally purchased them for in order to finance their lifestyles. I suppose we should just ignore their consumer debt because it was masked as household debt, right? Hey that’s great! All you have to do is take all the problems, hide them in another category and deny the problem exists! Now I do not have to be a “gloomer” anymore!
Stop distorting what I said, I never suggested such a thing. I stated clearly why the increase in household debt is misleading, namely that the home ownership rate has increased over 20% since then. More people owning homes is not bad for the economy, yet it would sufficiently increase the household debt-to-GDP ratio. Most of the increase from the 50's throughout the 90's is likely attributable to this single issue! Consumer debt is going to tell much more about people's spending than household debt.
The situation is not as dramatic as you gloomers want to make it look, but I guess if you only look at linear graphs this is the impression one walks away with.
Have you still not grasped the fact that household debt has replacedconsumer debt for many people? Instead of using high interest credit cards people simply refinanced their homes, gambling on the fact that those homes would not lose their value. The money was handed out by those generous banks and the debts piled up - it was all p*ssed up the wall at the spending party and now the hangover has kicked in - and the homeowners have finally woken up deeper in debt and with far less (if any) equity.
And do you really think interest rates are going to stay as artificially low as they are? What do you think will happen to home values when they start rising?
Last edited by London Girl; 09-16-2009 at 05:28 PM..
I was under the impression that the economic collapse was caused by people going too far in debt to buy houses they could not afford and then rolling most of their debt from credit cards, furniture, auto purchases, and vacations into their mortgages.
If this is why you think the economy collapsed, then I can see why you have so many inaccurate beliefs about the economy!
Quote:
Originally Posted by jimhcom
I suppose we should just ignore their consumer debt because it was masked as household debt, right? Hey that’s great!
Again, please stop distorting what I say. Ignore it? I explicitly spoke about mortgage equity withdraws. What you're talking about primarily occurred during a 4~5 year period and has not been occurring for a good 2 years.
Only a fraction of mortgage equity withdraw was being used as consumer debt and the vast majority occurred in a few select areas of the country.
You might want to give a little more thought to your theories before you post them as fact.
More people owning homes = market saturation = decreased demand = decreased profits
Haha, the irony here is amusing. Perhaps you are under the impression that the additional 20% or so that own homes today use to live in cardboard boxes, but they did not. The relevant factor in terms of housing is the population not the home ownership rate! These people were renting homes instead of owning them in the 1950's.
Have you still not grasped the fact that household debt has replacedconsumer debt for many people? Instead of using high interest credit cards people simply refinanced their homes, gambling on the fact that those homes would not lose their value.
I have to ask, did you even read what I posted? Because...I seem to recall explicitly discussing MEW driven consumption. I really wish you guys would make an effort to have an honest discussion.
My response to this has already been stated, MEW driven consumer consumption was a relatively short-lived event and only accounted for a relatively small fraction of total MEW. Most MEW went into home improvement (which is what it was traditionally used for) or leveraged in real estate speculation.
Quote:
Originally Posted by London Girl
And do you really think interest rates are going to stay as artificially low as they are? What do you think will happen to home values when they start rising?
I'm not sure what relevance this has to what is being discussed. Interest rates will stay low so long as inflation stays low, in real terms current rates are not "artificially low" they are actually a bit high. Rates will increase as the economy recovers, so there many be little effect on home prices as there will be completing forces.
Only a fraction of mortgage equity withdraw was being used as consumer debt and the vast majority occurred in a few select areas of the country.
Ok Einstein, what fraction of mortgage equity withdrawal was used for consumer debt and paying off credit cards. Seeing as you are such a fan of data, I would like to see some data to back your claim.
I'm not sure what relevance this has to what is being discussed. Interest rates will stay low so long as inflation stays low, in real terms current rates are not "artificially low" they are actually a bit high. Rates will increase as the economy recovers, so there many be little effect on home prices as there will be completing forces.
Wrong, interest rates are determined by the bond market. They increase and decrease in relation to bond demand. Real estate prices are directly affected by interest rates; as interest rates go up prices go down. Do you have any actual experience in these things?
Ok Einstein, what fraction of mortgage equity withdrawal was used for consumer debt and paying off credit cards. Seeing as you are such a fan of data, I would like to see some data to back your claim.
There is no "hard data" on this because no data series tracks this sort of thing, but there have been a number of studies on it. Firstly, the data suggests that people did not use mortgage equity withdrawal to pay down things like credit cards, rather it was used on "consumption" (in a very general sense). But the primary consumption item was home improvement, something that traditionally used equity withdraws and not consumer lines of credit.
Anyhow, my claim is not that no MEW was used on items that traditionally use consumer credit, but rather that the majority of MEW was not used for such things. The use of MEW on items that traditionally use consumer credit was not the norm, it only occurred over a few years in select areas of the country.
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