Thursday, December 28, 2006

FORGET PARIS HILTON-- BUSH'S ECONOMIC "STRATEGIES" HAVE LEFT AMERICAN FAMILIES UP THE CREEK WITHOUT THE PADDLE

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I was surprised this morning by the number of e-mails I got from people with questions about the "Paris Hilton story" yesterday. And, wisely, no one acknowledged Paris Hilton's existence. Basically, everyone was stunned by one fact. Here's an example from Dan:
holy shit. so I just read your amazing/chilling "Paris Hilton" post, and, well, among the whole sordid cesspool of numbers, one jumped out at me:

"Number of households using credit to cover basic living expenses: 7 in 10."

Does that not count mortgages on homes? Like, does it only count groceries and health care and stuff like that? (Hint: please say it also counts mortgages. Please...)


This morning's Agonist has a powerful piece showing how American households are in the worst financial shape since World War II. Considering the competence, selfishness and ideological mania of our national leadership, this should surprise no one. But it's laid out so well that I want to recommend that everyone read it in full and look at the charts as well. Briefly, consumer debt is doing American families in. A comparison of the total outstanding household mortgage debt with total household real estate holdings-- the leverage ratio that economists and financial people use to determine if a household has enough assets to cover all its liabilities-- shows that homeowner equity, which represents the amount a person actually owns in real estate, is at a post WWII record low.

"Household liquidity fell to a post-WWII low in the third quarter of 2006... Households already have borrowed so much that their level is at a post-WWII high. Secondly, households have already borrowed so much that their debt service burden is at a 25-year high. And thirdly, residential real estate which accounts for 30.5% of the total market value of households assets, is the single largest asset in households portfolios compared with deposits, credit market instruments, corporate equities and other tangible assets. Of these other asset categories, residential real estate probably is the least liquid. In sum, household have never been as highly leveraged as they are now or as illiquid as they are now, and their single largest asset is in danger of actually falling in value." In effect, we now have a record low in family assets to pay off debts... Households," he concludes, "have never been as highly levered as they are now or as illiquid as they are now, and their single largest asset is in danger of actually falling in value."

3 Comments:

At 9:05 AM, Anonymous Anonymous said...

Thanks for covering the Injustice Index so well. Totally love the humor.

And to all of the DownWithTyranny fans who liked the Index;
1. THANKS!
2. there's more where that came from in the DMI Year In Review report.
http://drummajorinstitute.org/yearinreview/

 
At 9:47 AM, Anonymous Anonymous said...

In my sample of one, yes, we have used our credit card to supplement our mortgage payment.

Ain't life grand?

We live in a town where a major employer closed. Now, the house we own is not likely to sell any time soon and we cannot get out from under without either paying and paying or walking away. We have not given up yet...so we pay.

At this point, I am trying to get one more kid to come home and pay rent. At that rate, we might be able to keep the house for a bit til things are better. But, it might never be.

My husband though says he is selling this spring, that must mean I am too. I hope it works. But, I also have mixed emotions.

 
At 12:14 PM, Blogger Scott said...

Unfortunately there is something else at work here beyond people paying mortgages with credit cards, I live in the bay area and I know people who have done this from time to time starting in the mid 90s, so this nothing new to me.

The rampant consumerism of our culture is like a drug to many people, the new car, the new furniture, the new tv, the new ipod, the new clothes and so on are not things to save and buy they are things that must be had right now. You could call it the "fast food" mentality that is built up to a fever pitch through constant advertising bombarding the average person who can't resist it and see it for what it is. A desire and its fulfillment that will never be satiated by all the goods and products in the world.

When a culture is based on what you have and not on who you are there will never be satisfaction.

Can you imagine anyone hanging out with Donald Trump if he was a construction worker? Yet, for some reason he is looked up to because...he has money. Lots of it and a tv show. Good for him. Why should I care about him? What is it I am supposed to like? Is he someone I would even want to be in the same room with? What kind of person is he really? That doesn't seem to matter he has money and that is all that counts.

 

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