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Well... this is slightly disingenuous. The WSJ article specifically mentions that this relates to secured debt (mortgages), not credit card debt. Interest rat

by furyg3 12y ago

Well... this is slightly disingenuous. The WSJ article specifically mentions that this relates to secured debt (mortgages), not credit card debt. Interest rates are fully tax deductible in the Netherlands, which incentivizes higher mortgage debt than in many other countries. Many people own homes, and the ones that do borrow the majority of the market value when buying. Housing prices did fall recently (and are now headed back up), but they did not tank as they did in the US. Similarly, the rules on mortgages were on the whole much stricter than in the US; this, combined with the relatively low unemployment rate, resulted in a foreclosure rate which is the lowest in Europe. The housing market during the crisis, and to some extent now, looks a lot like people stuck in the place where they live. They can make the mortgage payments just fine, but their hopes of swapping that starter house for a larger one have been put on hold until either they build up more equity or the housing market improves.

Cthulhu_ 12y ago
^this; In part it's a culture thing that one buys a house when one gets married and the like, but the tax rules (deductible mortgage interest) and whatnot give people an incentive to never finish paying off their mortgages. Another factor (IIRC) is that before the crisis, housing prices just went steadily upwards, doubling or even tripling their values during a lifetime (probably less if you take inflation into consideration). This caused a lot of people to extend their mortgage or take a second or even third mortgage on the gained value of their house, which was used to add to the house or buy a car or things like that.
adventured 12y ago
First of all, household debt is household debt, it is not disingenuous, it's exactly what it sounds like. And it obviously does not only include mortgage debt. Second, who said anything about the United States? Why is that always the knee-jerk reaction? Mortgage debt is included in the US calculation anyway, so what's the point exactly? The US doesn't get a special calculation for household debt that is different from the Netherlands. Non-the-less I wasn't comparing the two. Let's compare the Netherlands to the rest of Europe who they are in theory most similar to: their individual debt is drastically higher than basically all of Europe. Third, having eg 100% of your home consumed by debt, means you do not own equity in your home. That's household debt, and it should count just as much as credit card debt should: you have to pay for it, it's going to come out of your future earnings one way or another, and if you do not pay for it there will be serious financial consequences. And when the number is 250%+, you can bet that is coming home to roost sooner rather than later. My point stands: to deal with that extreme level of household debt (and that's assuming there isn't another crisis any time soon that tips a dangerous situation into an untenable situation) will require a dramatic change to how the people of the Netherlands live. Most likely part of that equation will have to be working more. My argument is that a social trade-off has been made between work, leisure and debt, and to the extent that compromise has been made, in the future it will have to be reversed.
- mdemare 12y ago
  It does by no means follow that the current level of household debt must lead to any dramatic changes. A high household debt implies that there's relatively less money left over for domestic consumption, compared to similar countries with less debt. Low domestic consumption is a drag on employment. That means that new jobs must come from the export sector, but with the current worldwide stagnation, that does not look hopeful. I fear another decade of very slow growth, not a sudden collapse: unemployment is stable, mortgage requirements have been fairly strict, so people who can pay their mortgage this month, can pay it the next.

by furyg3 12y ago

Cthulhu_ 12y ago

^this; In part it's a culture thing that one buys a house when one gets married and the like, but the tax rules (deductible mortgage interest) and whatnot give people an incentive to never finish paying off their mortgages. Another factor (IIRC) is that before the crisis, housing prices just went steadily upwards, doubling or even tripling their values during a lifetime (probably less if you take inflation into consideration). This caused a lot of people to extend their mortgage or take a second or even third mortgage on the gained value of their house, which was used to add to the house or buy a car or things like that.

adventured 12y ago

First of all, household debt is household debt, it is not disingenuous, it's exactly what it sounds like. And it obviously does not only include mortgage debt. Second, who said anything about the United States? Why is that always the knee-jerk reaction? Mortgage debt is included in the US calculation anyway, so what's the point exactly? The US doesn't get a special calculation for household debt that is different from the Netherlands. Non-the-less I wasn't comparing the two. Let's compare the Netherlands to the rest of Europe who they are in theory most similar to: their individual debt is drastically higher than basically all of Europe. Third, having eg 100% of your home consumed by debt, means you do not own equity in your home. That's household debt, and it should count just as much as credit card debt should: you have to pay for it, it's going to come out of your future earnings one way or another, and if you do not pay for it there will be serious financial consequences. And when the number is 250%+, you can bet that is coming home to roost sooner rather than later. My point stands: to deal with that extreme level of household debt (and that's assuming there isn't another crisis any time soon that tips a dangerous situation into an untenable situation) will require a dramatic change to how the people of the Netherlands live. Most likely part of that equation will have to be working more. My argument is that a social trade-off has been made between work, leisure and debt, and to the extent that compromise has been made, in the future it will have to be reversed.

mdemare 12y ago
It does by no means follow that the current level of household debt must lead to any dramatic changes. A high household debt implies that there's relatively less money left over for domestic consumption, compared to similar countries with less debt. Low domestic consumption is a drag on employment. That means that new jobs must come from the export sector, but with the current worldwide stagnation, that does not look hopeful. I fear another decade of very slow growth, not a sudden collapse: unemployment is stable, mortgage requirements have been fairly strict, so people who can pay their mortgage this month, can pay it the next.