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HomeOff Topics News & Politics › U.S. debt load falling at fastest pace since 1950s
06-08-2012 03:27 PM  6 years agoPost 1
PsychoZ

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http://finance.yahoo.com/news/u-deb...-040045522.html

WASHINGTON (MarketWatch) — Everyone knows America has too much debt. What they don’t know is that things are getting better, not worse.
Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.
If you want to know why economic growth has been so tepid, here’s your answer. Four years after the storm hit, the economy is still deleveraging. And it’s very hard for any economy to grow when everyone is focused on increasing their savings.
Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.
The rapid rise in federal debt over the past four years has distracted us from the big picture. The level of public debt is indeed worrisome, but it’s not as big a worry as the economy’s total level of debt — public and private.
Although we have a whole cottage industry devoted to warning us about the dangers of too much public debt, we don’t have any comparable Cassandras telling us about the dangers of too much private debt. Yet the history of the past 30 years (or 300) clearly shows that too much debt, of whatever variety, can pose a systemic risk to the national and global economies.
As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. (Greece is unique in having a public sector that ran up spending while its private sector is rather conservative.)
As the political rhetoric about the federal deficit has heated up, we’ve lost sight of the progress that’s been made in bringing total debt back under control. The U.S. is actually doing much better than you’d think if you just listened to the conventional fears about how we’re rushing headlong into a debt Armageddon.
In fact, since the recession ended in June 2009, total U.S. debt has risen at the slowest pace since they began keeping records in the early 1950s. While Washington has taken on a lot of debt since then, the private sector has paid off, written off or dumped on the government almost as much.
As a share of the economy, debt has plunged as a consequence of rapid deleveraging by families, banks, nonfinancial businesses, and state and local governments. The ratio of total debt to gross domestic product has fallen from 3.73 times GDP to 3.36 times.
In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%. By contrast, in the 11 quarters before the recession began, in those bubble years of 2005, 2006 and 2007, total debt increased by $10.7 trillion, or 28%.
And it wasn’t just the U.S., other advanced economies were adding on to their debt loads as well, with most of the debt taken out by the private sector.
Debt was growing at an unsustainable pace, but it was fueling the U.S. and global economies.
Economists who have studied the impact of indebtedness have found that low levels of debt are essential to growth, but that high levels of total outstanding debt can hurt an economy. Beyond a tipping point, adding on more debt will reduce growth over the long run, even if it inflates a bubble in the short run.
“At low levels, debt is good. It is a source of economic growth and stability,” concluded Stephen Cecchetti, M.S. Mohanty and Fabrizio Zampolli, economists for the Bank of International Settlements, in a paper presented at the Federal Reserve’s Jackson Hole conference last August. “Beyond a certain point, debt becomes dangerous and excessive,” and can lead to increased volatility, financial fragility and slower growth. It can even bring down the real economy with it, as we have seen. Read the BIS paper, “The Real Effects of Debt.”
Cecchetti and his co-authors found that growth can be impaired once nonfinancial corporate debt hits about 90% of GDP, or when household debts hit 85% of GDP, or when public debts hit about 85%.
In the U.S., household debt has now fallen to 84% of GDP from a peak of 98%. Nonfinancial corporate debt has fallen to 77% from a peak of 83%. Financial sector debt has plunged from 123% of GDP to 89%. Public debt has risen to 89% from 56%.
The deleveraging process in the private sector still has a ways to run, not based on some economists’ rule of thumb, but based on what real people are actually doing. Banks and households are still slashing their debt, while nonfinancial companies are beginning to borrow again, but only a little, according to the latest data from the Federal Reserve’s flow of funds report. Take a look at the flow of funds.
According to a study by McKinsey published earlier this year, U.S. households may have two more years of deleveraging left before their debts are sustainable again.
If McKinsey is right, the U.S. economy may have to endure a couple more years of slow growth.

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Tea Parties are for little girls with imaginary friends

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06-08-2012 03:48 PM  6 years agoPost 2
Dennis (RIP)

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In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%.
Nobody told me.

The recession officially ended ???????

That article has a lot of Bullsh#t in it.

Liberty once lost, is lost forever.

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06-08-2012 04:06 PM  6 years agoPost 3
GREYEAGLE

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Nex Rutting : Is a market lobbiest !!!! With the Organization Where ???

The article say:'s

Give Us your $$$$$ you dumb sap's. We squandered the other stuff and they may not print more !!

Just watch the plethora of National Investment House adds:

Every market in the advertizement slot's on T.V. is packed !!

0% Interest on Spanish Long Term Treasure Note;s = 0 EURO

How's your stock of Olive Oil ??????
U.S. households may have two more years of deleveraging left before their debts are sustainable again.
[quote]

greyeagle

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06-08-2012 04:51 PM  6 years agoPost 4
dilberteinstein

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All I can say is Wisconsin is now on the right path to recovery...hint, hint America.

90% of life is "showing up"

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06-08-2012 05:03 PM  6 years agoPost 5
ssmith512

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Indianapolis, IN USA

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Not just Wisconsin. San Jose and San Diego issued major blows to the public sector unions with their vote to reform pensions for govt workers as well.

It's a small step, but it appears the majority of the working public is starting to realize that the public unions have been milking them out of their own money for a long time - to put it in Obama's own words that everyone can easily understand, it is time the public sector unions started "paying their fair share".

I think the voting, private working class is starting to wake up. Finally.

Steve

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06-08-2012 05:15 PM  6 years agoPost 6
PsychoZ

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All I can say is Wisconsin is now on the right path to recovery...hint, hint America.
Isn't that also the state where you are mandated to have health insurance or pay a fine?

Tea Parties are for little girls with imaginary friends

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06-08-2012 05:18 PM  6 years agoPost 7
Dennis (RIP)

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Isn't that also the state where you are mandated to have health insurance or pay a fine?
No clue.

Liberty once lost, is lost forever.

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06-08-2012 05:49 PM  6 years agoPost 8
irocu88

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Isn't that also the state where you are mandated to have health insurance or pay a fine?
He did not say it was all good....just on the right track now.

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06-08-2012 06:38 PM  6 years agoPost 9
PsychoZ

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He did not say it was all good....just on the right track now.
So under Mitt it is on the right track, but under Obama it is unconstitutional. I think I understand now.

Tea Parties are for little girls with imaginary friends

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06-08-2012 06:47 PM  6 years agoPost 10
a1saleen

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I don't care what anyone says., when it comes to labor I am Pro union

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06-08-2012 08:37 PM  6 years agoPost 11
Thomas L Erb

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Alliance ohio

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a1saleen
I don't care what anyone says., when it comes to labor I am Pro union
I got no problem with the original purpose for unions but now they are as much a bunch of wack jobs milking it members as entitlementist are to the gov doles . Greed is killing everything and will be our end.

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06-08-2012 10:12 PM  6 years agoPost 12
irocu88

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At one time unions were beneficial, now they do nothing but drive prices up.

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06-08-2012 10:13 PM  6 years agoPost 13
irocu88

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So under Mitt it is on the right track, but under Obama it is unconstitutional. I think I understand now.
He was talking along the lines of walker I assume....but sure, anyone other than obama is closer to the right path.

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06-09-2012 01:42 AM  6 years agoPost 14
steve9534

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yakima, wa.

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Debt load
Dennis is correct in that about 2/3's of the way through the article is buried the fact that the actual debt load has increased, not decreased as the headline states. Look for more of this same propaganda as we get nearer the elections and the news media tries to cover for their guy, Obama. It's just maddening that they're willing to lie about what is really going on. This article was a headline news item on Yahoo this am and as I read through the comments there, it's clear that most folks never bother to get past the headlines. The majority of them just swallowed the writer's lead and never got to the place in the article where the facts of the situation were written. steve.

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06-09-2012 02:04 AM  6 years agoPost 15
2slow

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06-09-2012 05:04 AM  6 years agoPost 16
baby uh1

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Was that article from the Fantasy Island News? I guess since everything is getting better unemployment is going down there also?
This is just more Obama BS like the fact that they count you as having a green job if you clean the toilets at the solar panel factory that went broke with public money!

Anything is possible if you don't know what you are talking about!

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06-09-2012 01:29 PM  6 years agoPost 17
fla heli boy

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cape coral, florida

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Only in Liberalland, can somebody say that last years deficit was 1.6 trillion and this years deficit is 1.58 trillion, so we're reducing the debt. I sometimes wonder if these clowns could make change for a dollar.

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06-11-2012 07:22 PM  6 years agoPost 18
SSN Pru

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Taxachusetts

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Psycho
So under Mitt it is on the right track, but under Obama it is unconstitutional. I think I understand now.
I've said it before and I'll say it again. It's ABSOLUTELY legal for a STATE to mandate healthcare but it's ABSOLUTELY unconstitutional for the FEDERAL GOVERNMENT to do so. Mitt Romney was the Governor or a STATE and Obama is the POTUS. Get it? State vs. Federal government??

I'm absolutely AGAINST government telling me I HAVE TO HAVE SOMETHING but even I can understand what I've said above.

Stupidity can be cured. Ignorance is for life!

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