4 ms·

I love this article. Very well laid out and simply explained. This article is explaining the set in stone mental health association with debt servicing. >I’m n

I love this article. Very well laid out and simply explained. This article is explaining the set in stone mental health association with debt servicing. >I’m not an anti-debt zealot. There’s a time and place, and used responsibly it’s a wonderful tool. I am, here's how I would add to this article. How do you tell how in debt you are. How tight is the graph? Its not just your debt. Your paycheque comes from your neighbour's spending. If they are in debt, then you too will feel their collective debt. Generally speaking debt is mortgages> cars> tuition. Not a great deal else. So you can actually look at the public data. Norway is 210% debt to income. Canada is 178% debt to income. The threshold of 100% is a big deal. It's when discretionary spending stops. At 100%, your income goes 100% toward servicing debt. It's generally regarded that you keep this in the 30-40% range. When these thresholds hit ~130% that's typical of a financial crisis. To reach 178% or above 200%... that's only possible if actions are being taken by the central banks to prevent a crash temporarily. Checking Norway, because I don't know the state of their central bank. It seems Norway went bankrupt in the early 2000s? It has been a steady crash since being prevented by their central bank? Private Debt to GDP in Norway increased to 277.90 percent in 2023 So here's the thing about central banks working to prevent crashes. You can do so of course, but you also need to deflate the risk. But all they are doing is inflating the inevitable pop. You're just making the crash worse over time.

sokoloff 2y ago
> Norway is 210% debt to income. > Canada is 178% debt to income. > The threshold of 100% is a big deal. It's when discretionary spending stops. At 100%, your income goes 100% toward servicing debt. You're confusing two different measures there. The first two are "total debt" (a stock) vs "total income" (a flow). Then, in the last paragraph, you switch to talking about consumption declines as if the total debt stock was directly comparable to a total income flow, which it obviously isn't. The total interest due on the debt is the flow that you should be comparing to the total income flow. (Otherwise, if spending stopped at 100% debt-to-income, how could Canada and Norway's economy be working at 1.8 and 2.1 times that trigger threshold?) My mortgage debt (the stock) is give-or-take 100% of our annual household income (the flow). We have plenty of money left over each month to buy things, because the payments on that mortgage (the flow) are a sensible fraction of our household income (the flow).
- incomingpain 2y ago
  >The total interest due on the debt is the flow that you should be comparing to the total income flow. That's what these numbers are. I'm talking about a calculated popular metric many people use for many countries all over the world. It's really not a controversial or debated subject for either of these countries.
  - sokoloff 2y ago
    You’re incorrect about what that figure is. https://tradingeconomics.com/norway/households-debt-to-income https://tradingeconomics.com/norway/households-debt-to-incom... That means for every 100 units of annual income, Norwegians owe 210 units in total debt. (Not total debt service payments [a flow, with unit of kr/yr], but total debt [a stock, with unit of kr].)
    - incomingpain 2y ago
      >You’re incorrect about what that figure is. Why then would all these countries, as websites such as your source be calculating such a useless indicator? If I am incorrect?
      - sokoloff 2y ago
        It's not a useless measure. Normalizing total debt against total income is a sensible way to compare countries to another. It's just not a measure that is a unitless ratio of two measures with the same units. (The unit is years [of income to payoff the debt if no further interest accrued].)
        incomingpain 2y ago
        >It's not a useless measure. Thanks for confirming that. I'll return to my original post then.

sokoloff 2y ago

> Norway is 210% debt to income. > Canada is 178% debt to income. > The threshold of 100% is a big deal. It's when discretionary spending stops. At 100%, your income goes 100% toward servicing debt. You're confusing two different measures there. The first two are "total debt" (a stock) vs "total income" (a flow). Then, in the last paragraph, you switch to talking about consumption declines as if the total debt stock was directly comparable to a total income flow, which it obviously isn't. The total interest due on the debt is the flow that you should be comparing to the total income flow. (Otherwise, if spending stopped at 100% debt-to-income, how could Canada and Norway's economy be working at 1.8 and 2.1 times that trigger threshold?) My mortgage debt (the stock) is give-or-take 100% of our annual household income (the flow). We have plenty of money left over each month to buy things, because the payments on that mortgage (the flow) are a sensible fraction of our household income (the flow).

incomingpain 2y ago
>The total interest due on the debt is the flow that you should be comparing to the total income flow. That's what these numbers are. I'm talking about a calculated popular metric many people use for many countries all over the world. It's really not a controversial or debated subject for either of these countries.
- sokoloff 2y ago
  You’re incorrect about what that figure is. https://tradingeconomics.com/norway/households-debt-to-income https://tradingeconomics.com/norway/households-debt-to-incom... That means for every 100 units of annual income, Norwegians owe 210 units in total debt. (Not total debt service payments [a flow, with unit of kr/yr], but total debt [a stock, with unit of kr].)
  - incomingpain 2y ago
    >You’re incorrect about what that figure is. Why then would all these countries, as websites such as your source be calculating such a useless indicator? If I am incorrect?
    - sokoloff 2y ago
      It's not a useless measure. Normalizing total debt against total income is a sensible way to compare countries to another. It's just not a measure that is a unitless ratio of two measures with the same units. (The unit is years [of income to payoff the debt if no further interest accrued].)
      - incomingpain 2y ago
        >It's not a useless measure. Thanks for confirming that. I'll return to my original post then.