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Household debt jumps by the most in 14 years to nearly $15T in second quarter

18 points by harambae 5y ago

BitwiseFool 5y ago
Who else feels a looming sense of economic disaster? For the past few years it seems like it's on the horizon but then the markets end up going higher and higher.
- bequanna 5y ago
  It is easy to forget, maybe because it was relatively brief, but disaster occurred a little over a year ago both in the markets and the economy. The aggressive action of central banks and governments made this pain relatively short lived for the average person. The cost of that action: maybe just a deferral of the pain? It is entirely possible that we traded a medium length “shutdown” recession for much more painful inflation or lit the fuse on some other crisis that we aren’t even aware of yet.
  - AnimalMuppet 5y ago
    > It is entirely possible that we traded a medium length “shutdown” recession for much more painful inflation Well, there were a lot of people who were going to be out of work, unable to pay rent, evicted, and homeless. That would have had knock-on effects as those people quit buying things, which hurts more businesses, resulting in more layoffs, and so on. Instead, people may face inflation, which could give them worse circumstances than they had pre-Covid. It's going to hurt. But it's going to hurt a lot less than the homelessness would have, and it's going to destroy a lot fewer businesses. I don't like the inflation, but I suspect that it was a good trade-off. > ... or lit the fuse on some other crisis that we aren’t even aware of yet. Yeah. That's worryingly plausible. We've moved into an area of the possibility space where we don't have much data. We now have to avoid catastrophe as we find our way back out, but we don't know what the set of possible catastrophes are in this new area.
avgDev 5y ago
Nothing concerning really. Rates are low so people are purchasing homes. US used to build a lot more new homes but things changed in 2008. We have been ramping up since but still are not where we were. This results in too little inventory driving prices up. The CC debt and auto is not that bad.
- jiscariot 5y ago
  Also, borrowing money for purchase of real assets is a pretty decent inflation hedge, when your central banks and government are injecting trillions of dollars of newly printed money in to the economy.
  - AnimalMuppet 5y ago
    The problem is that assets (even real assets) can be in a bubble when your central bank and government are injecting money into the economy. If you buy with borrowed money, and the bubble pops, then you own money on an asset whose value cratered.
nunez 5y ago
> At least in housing, though, the credit quality of borrowers has been high. > The median credit score for newly originated mortgages was 760, with 71% of all borrowers having a score of over 760. The share of mortgages moving to delinquency totaled just 0.4%, a record low, while the 0.5% share of mortgages that were 90 days or more past due also set a new record amid the ongoing forbearance programs. I mean, that's good, right?
naveen99 5y ago
So households are about 30% loan to value. Sounds ok ?

18 points by harambae 5y ago

Who else feels a looming sense of economic disaster? For the past few years it seems like it's on the horizon but then the markets end up going higher and higher.

bequanna 5y ago
It is easy to forget, maybe because it was relatively brief, but disaster occurred a little over a year ago both in the markets and the economy. The aggressive action of central banks and governments made this pain relatively short lived for the average person. The cost of that action: maybe just a deferral of the pain? It is entirely possible that we traded a medium length “shutdown” recession for much more painful inflation or lit the fuse on some other crisis that we aren’t even aware of yet.
- AnimalMuppet 5y ago
  > It is entirely possible that we traded a medium length “shutdown” recession for much more painful inflation Well, there were a lot of people who were going to be out of work, unable to pay rent, evicted, and homeless. That would have had knock-on effects as those people quit buying things, which hurts more businesses, resulting in more layoffs, and so on. Instead, people may face inflation, which could give them worse circumstances than they had pre-Covid. It's going to hurt. But it's going to hurt a lot less than the homelessness would have, and it's going to destroy a lot fewer businesses. I don't like the inflation, but I suspect that it was a good trade-off. > ... or lit the fuse on some other crisis that we aren’t even aware of yet. Yeah. That's worryingly plausible. We've moved into an area of the possibility space where we don't have much data. We now have to avoid catastrophe as we find our way back out, but we don't know what the set of possible catastrophes are in this new area.

avgDev 5y ago

Nothing concerning really. Rates are low so people are purchasing homes. US used to build a lot more new homes but things changed in 2008. We have been ramping up since but still are not where we were. This results in too little inventory driving prices up. The CC debt and auto is not that bad.

jiscariot 5y ago
Also, borrowing money for purchase of real assets is a pretty decent inflation hedge, when your central banks and government are injecting trillions of dollars of newly printed money in to the economy.
- AnimalMuppet 5y ago
  The problem is that assets (even real assets) can be in a bubble when your central bank and government are injecting money into the economy. If you buy with borrowed money, and the bubble pops, then you own money on an asset whose value cratered.

nunez 5y ago

> At least in housing, though, the credit quality of borrowers has been high. > The median credit score for newly originated mortgages was 760, with 71% of all borrowers having a score of over 760. The share of mortgages moving to delinquency totaled just 0.4%, a record low, while the 0.5% share of mortgages that were 90 days or more past due also set a new record amid the ongoing forbearance programs. I mean, that's good, right?

naveen99 5y ago

So households are about 30% loan to value. Sounds ok ?