Consumer Debt More Than Doubles in Decade

[spinbaby]

Consumer Debt More Than Doubles in Decade

Mon Jan 5, 6:46 PM ET

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By EILEEN ALT POWELL, AP Business Writer

NEW YORK - As the bills from holiday spending sprees arrive, Americans are finding that the mountain of debt they've built has gotten even higher.
(snip)

Consumer debt hit a record $1.98 trillion in October 2003, according to the most recent figures from the Federal Reserve (news - web sites). That debt — which includes credit cards and car loans, but not mortgages — translates to some $18,700 per U.S. household.

At the same time, the government says the nation's savings rate dropped to just 2 percent of after-tax income in the first half of the year. That means many people lack the means to deal with financial emergencies, much less their eventual retirement.

http://story.news.yahoo.com/news?tmpl=story&cid=509&e=3&u=/ap/debt_in_america

[cthrumatrix]

1. just like the govt. .....we are in for some trouble if this keeps up.

[Pale Blue Dot]

2. I keep saying, this whole economy is a house of cards.

I can't even guess as to what's holding it up anymore.

[cthrumatrix]

3. people confuse the stock market with the economy...when it goes...

say "good night".

Who knows how much the govt is propping it up for the election and a consumer "feel good for shrub"

[Yavin4]

4. Without All of This Debt...

Bush's economy would be sinking into a hole. We got a lot of DUers here dancing the economy happy dance, but it's all someone else's debt.

[loftycity]

5. The Hammer of Credit

The unemployment is so high and the paycheck is always shrinking.
And we all live under the Hammer of credit reports---which is just another way to terrorize all of us. The Hammer keeps us in line to do their bidding.
Don't you just wish that the corporates credit reports would be so transparent as an individual's??

[cthrumatrix]

7. LOL...corp credit reports....look at how they abuse GAP reporting

two standards...sero transparency...do they include "options"-- heck no

corporations can do what they want...especially if you "buy" the right people...ask Ken Lay !!

[54anickel]

12. The first time I saw a financial report discussing non-GAAP measures,

EBITDA and Adjusted EBITDA I was shocked! I was in accounting many years ago and had not kept up on the many changes in performance measures. I still have a hard time accepting these changes.
No wonder we are in such a mess!

[prolesunited]

8. Think of how many areas

of life that your credit report can now effect. Both home and auto insurance providers have begun using credit scores to set premiums. If you have a poor credit score, you can expect to pay more for insurance.

Also, employers are increasingly running credit checks on their potential employees. Think about how trapped you can become. You lost your job, so you fell behind on your bills and now you may be prevented from getting a job.

[loftycity]

11. The Up-Tight Right

Employers check your credit to see if your a player. In their world.
To be a player you have to believe the denial, deceit and deception.
And then you are accepted into the corporate golf game.
All of us here on this site...Know the game. Others don't get it.

Hope the trend changes...The fastest way to get people to change is to be thought of as not with the crowd.
Maybe we could just start the simple trend that Corporate is just not the trend any longer...it's over.
(It's always been over...they got sucked in)

New Right wingers are frivolous and can change. And Republican is just not hip anymore. The up-tight right need a new sin that they can relax with and not bother anyone else. Let's find them one!

[sendero]

6. Debt.

Businesses in this country, ever eager for sales no matter where they come from, have made this towering debt possible.

Credit cards are passed out like candy, with practically no regard for whether or not the user has any history or ability to pay.

Durable goods are routinely sold on the "no money down and no payments until next July" plan. The thing is practically worn out before the buyer ever starts paying for it. There is no connection between the effort (payment) and the reward (enjoying your new toy).

Here in Dallas, I hear ads on the radio every day - buy a 150K (which is not a bad house in this area) for no money down. Basically, there is no down payment and all closing costs are folded into the mortgage. Who thinks this is a good idea? If you haven't the discipline to save a nominal down payment, what is the likelihood you can manage a household? Foreclosure rates answer that question handily.

Of course, consumers are to blame for this as well. Nobody is making them take advantage of these fundamentally flawed transactions. But we are all going to pay when the bill comes due.

[ignatius]

45. One of my co-workers has a son who owed the IRS. When he bought

his no money down house, the bank even kicked in the dough to pay the IRS to make him eligible for the mortgage.

If the mortgage house of cards begins to fall, a lot of banks will own a lot of property.

[toopers]

46. I wonder what happens in Florida?

When someone claims personal bankruptcy, the creditors cannot take the house. I guess home mortgages are exempt from this.

[AP]

9. Upward redistribution of wealth.

It's the most important issue in America today.

Rising interest rates on home mortgages could be the finacial emergency which breaks America's back.

That, or it's going to be the spigot which the banks open up each time Americans get a little bit of money.

E.g., if Dean gets his health care plan, and that saves people some money, the banks will jack up mortgates interest rates a little bit to take up the excess.

That's why we need to elect a candidate who takes the redistribution of wealth seriously.

[toopers]

15. The redeistribution of wealth sounds a lot like communism!

While I feel everyone should pay their fair share, who do we want in charge of determining what is fair?

[AP]

18. The people, obviously.

It's not just wealth that is being redistributed upwards since '72. It's political power. There's a serious democratic defecit in our society. We're doing things to transfer wealth to a very narrow group of people at the cost of wealth for millions of other Americans, and it's beign done in a way that would NEVER pass real democratic scrutiny.

Obviously, the people would chose to have a real social safety net, when the know the facts, and aren't being lied to by CNN. Obviously the people would chose to have well-regulated, fair marketplaces, even if it means less guaranteed wealth for Bush cronies.

Get it?

[AP]

19. Incidentally, we've been having an UPWARD redistribution of wealth for the

last 30 years. I don't know what you'd call that. Fascism? Oligopoly?

I don't know how you CAN'T talk about this issue. It has been happening.

[toopers]

21. Having put myself through school . . .

and entered the work force with only what I paid for with the money I earned, I do not have a problem, nor do I feel guilty about the wealth I have acquired over my life time. I had to give up a lot of short term gratification to focus on long term success. Once again, I am in favor of supporting the necessary services of government, which should include a safety net, but I do have a problem with the government deciding how much wealth I should be allowed to acquire based on my personal abilities and the decisions I make.

[Don Claybrook]

22. Did you attend a private school? n/t

[toopers]

26. Government high school, private college, which I paid for myself,

and private graduate school, again which I paid for myself.

[Don Claybrook]

28. Wow, you're rich

Your family must have a good deal of money.

[toopers]

34. That depends on who you ask!

And that is why I don't think it is right for the government to determine on how much I should make for the skills I have, unless I choose to work for the government.

Not long ago, the Soviet Union determined that people only needed 1 bedroom apartments, whether you were a family of 2 or 4.

That is also why terms like "redistribution of wealth" raise my eyebrows.

[AP]

63. The government is determining how much people can make.

It's dismantling union effectiveness, taxing the hell out of people who work for a living, and dismantling every institution (including public education) which give people a chance to maximize their eanring potential.

Look at Bush's immigration plan. It's a gift to employers who want low-wage employees. It'll drive down wages for non-immigrants.

I don't think I like the government redistribution wealth upwards like that!

[AP]

23. That's not what I'm talking about. I'm talking about no-bid contracts

for Halliburton, while Republicans defund the Small Business Administration. I'm talking about driving down wages, and increasing unemployment so that big businesses have lower labor costs and higher profits. I'm talking about defunding public education -- the thing that correlates the highest to future financial gain. I'm talking about a tax policy which taxes earned income at much higher rates than unearned income.

I'm talking about the Republcans doing things which make it harder for the middle and working class to accumulate economic, political and cultural power.

I could write 10 paragrpahs on this, but I think I'll wait for you to reply to see where I need to focus.

You do realize that whether you make money doing whatever business you're engaged in is not purely the product of personal diecisions you make? Presumably you need wealthy middle class customers to buy your goods or services. If they're paying through the nose for insurances, mortgages, and taxes (at levels which are determined by the government through legislation and market manipulations), they don't have anything left to pay you. But all the Bush cronies get their dollar.

The government determines the nature of the playing field on which we all engage in commerce. You're not some lone cowboy out there doing it all on your own. Obviously all those people who donate thousands to Bush are doing so becuase he's channelling wealth to them, and he's creating a society which gives them guaranteed wealth, and, if you're not on his list, he's making it harder for you to get ahead.

[toopers]

25. No bid contracts have been in place for some time.

They have been used by Presidents of both political parties. As a matter of fact, Clinton offered Halliburton several no bid contracts. They are necessary when there is not enough time to go through a normal RFP process.

[Beetwasher]

30. Yeah, but since when has a VP still been on the payroll of a company

that received a no bid contract to rebuild a country he was instrumental in destroying? Answer: never.

No one in Clinton's admin received a paycheck from Halliburton. Cheney STILL gets paid by Halliburton. To my knowledge, that's a first.

[toopers]

33. It is not only about paychecks . . .

you would also have to take into account stock holdings and other types of investments. As of yet, no president has ever been required to divest himself of his securities when taking office.

[Beetwasher]

37. Eh?

What's your point? Cheney's STILL GETTING PAID BY HALLIBURTON.

Pres and VP's have to put any investments into BLIND trusts. Actually, Cheney still has stock options in Halliburton too, but he claims he's going to give them away to charity. That's his excuse for holding on to them.

This has NEVER happened before. Presidents and VP's may still hold onto their investments by placing in them in BLIND trusts, but there's never been one who still got directly paid by a company that was receiving no bid contracts and still held onto millions in stock options in the same company. You don't think that's problematic?

http://www.guardian.co.uk/Iraq/Story/0%2C2763%2C912515%2C00.html

[toopers]

42. I definitely agree that there is possibly a conflict of interest.

I don't know the details of how the decisions were made to put Haliburton in place in Iraq. What I do know is that they were the company of choice for the Clinton Administration based upon the companies supposedly expert and specific knowledge. I would be much more inclined to say that there was some type of misconduct if the current mis administration had changed policies/vendors and put Haliburton in place over the previous administration's choice.

[Beetwasher]

47. Possibly?

Are you joking? There's DEFINITELY a conflict of interest. I have no problems with no bid contracts in theory, they are necessary sometimes, depending upon the situation. They are however relatively rare and when a company that receives a no bid contract is still paying a gov't official (Cheney) who is essentially directly responsible for starting an UNNECESSARY war that that company HUGELY benefits from, that's a serious problem. Have you noticed Halliburton's stock lately?

Why are you bending over backwards to try and mitigate and euphamize this obvious gross misconduct? Do you think if Clinton or Gore pulled something like this the media and congress would yawn lazily like they are now? No one in the Clinton admin. had financial ties to Halliburton when his admin awarded them contracts in the Balkans.

This "Well Clinton did it!" defense of yours seems oddly familiar...

[AP]

31. Not to transfer the HUGE SUMS they've been used to transfer in Iraq.

Are you seriously contesting my claim that Bush has pretty much existed to tranfer guaranteed wealth to people other than you and me, and that this is actually at the cost of our ability to secure a decent future, financially speaking?

[toopers]

35. Yes I am.

I have not been affected by Haliburton getting the contracts in Iraq this year anymore than I was affected by Haliburton getting the contracts in Iraq when Clinton was in office. The only time in my life I have ever been laid off was while Clinton was in office -- not that it was his fault. It was my fault for taking a job with a risky start up. However, while I was working I put away money. When I did get laid off, I had a good deal of money in the bank from which I could live. If the governement had been making decisions about how large my savings account shuld be while I was working I would have ended up being copletely depedent upon them when I was not working. The government redistributing wealth is scary.

[Logansquare]

41. It's fortunate for you that you did well before you were laid off

None here are advocating taking your home away from you, or forcing you to house a family of six in your back bedrooms. However, we cannot allow fellow Americans (especially children) to live like animals just because many of the jobs out there simply can't provide minimal food and shelter. Some people work hard their whole lives, but because they have jobs that don't pay very much, and poor or nonexistent health care, they have little or nothing in savings. They end up living in cars, letting their teeth rot, putting their children in foster care.

The "redistribution" of wealth through taxes provides revenue for paving roads, funding public transportation, giving children vaccinations, providing free public education, and countless other services that not only create a better standard of living for all Americans, but also create a business environment where corporations can expect a well-educated workforce with money to spend on their products. Better business environment, the more money you make. Bad business environment--banana republic.

Halliburton's sweetheart deals *do* effect you. Like the rest of U.S. taxpayers, you pick up the slack on the money drained from the Treasury. Your kids will pick up the tab on a deficit that has been created by Bush et al. "spending like drunken sailors" (to quote John McCain) and putting YOUR money into the pockets of cronies.

[toopers]

44. I have already agreed that there should be a safety net.

We all need help from time to time. However, my spouse and I delayed having children until we felt we had the financial means to care for them. I wish most of the population were so considerate, not to me, but to their own children!

[AP]

59. Read The Twilight of Equality by Lisa Duggan. What you just said, she

would call a very conservative sentiment.

Duggan argues that the right wing always tries to characterize poverty as something that is caused by sexually promiscuous (usually black) women.

Framing it like that makes people think sex, and private choices are the problem, when in fact, the problem is that the government destroys unions, drives wages down, taxes the hell out of people who work for a living, and in order to lower the tax burden and increase profits for big companies, terminates all the social programs (including good public education) which give people an equality of opportunity so that they can apply themselves fully to the world in whatever political, economic or cultural outlet they chose.

[ochazuke]

57. Redistribution of Wealth goes on all the time

It's not a communist conspiricy. Look at how wealth is being re-distributed now (and over the past three decades)

Read the new book "Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich -- and Cheat Everybody Else" by David Cay Johnston

I think you have been sold a bill of goods to the effect that only leftists want to use the tax system to redistribute wealth to the poor while centrists and Repbulicans want the system to be fair for all. And any criticism is labeled "class warfare" -- an echo of Marxist ideology which had no relevance to the discussion.

Wake up! You are being royally screwed! John Edwards is right on!

[AP]

61. Right on.

!

[Pale Blue Dot]

10. Refinancing is one of the major problems.

Americans are "refinancing" like crazy because of the low interests rates. There seems to be a misconception about this practice, that it's somehow "free money", when in fact it's just a new loan.

This economy will tank if inflation kicks in, because A)Interest rates will rise, followed by B) the collapse of the housing market and home values.

THEN all of these bills will come due.

[hatrack]

14. Are you thinking of "home equity loans"?

They used to be called "second mortgages", but I guess that sounds too threatening to homeowners.

Refinancing, I always thought, is simply negotiating a lower rate for an existing mortgage for a fee.

[cliss]

13. Consumer debt at 1.98 Trillion

I'm having a hard time just imagining this. I did the math, and here's what I came up with:

1,980,000,000,000 divided by 330,000,000 works out to $6,000 for every man, woman and child in the U.S.

What exactly is this new debt? Is it all credit card debt? Is it home refinancing, or does it include personal loans?

Either way, it's staggering. And it will cripple our economy. If this is what's driving the Bush "feel-good" news lately, they're in big trouble.

And even scarier: where the hell is this money coming from? Is the Federal Reserve working 24/7 printing new bills to make this possible? In that case, we're done for.

[pinniped]

16. If Germany can print new currency so can BULLshyt.

Since the AHOLE pres seems to have a fondness for all things German. Things like Operation Iron Hammer Claw or whatever.

[hatrack]

20. I thought it was Operation Iron Claw Hammer

Or was it Operation Ball-Peen Hammer?

[KansDem]

40. No, I think you're confusing that with Operation Orange Claw Hammer

Of Captain Beefheart fame...

http://www.shiningsilence.com/hpr/lyrics/orangeclawhammer.php

[Yavin4]

24. To Answer Your Question

What exactly is this new debt? Is it all credit card debt? Is it home refinancing, or does it include personal loans?

Yes, it's all that. Throw in college loans, car loans, store credit cards, etc., and you got the whole picture. Our entire economy is being built on cheap debt.

[phatkatt]

29. The article says it does NOT include home mortgages ...

... which is really the only "good" (relative) kind of debt. What would the numbers be if they included THAT!?!

This is truly sad, but what do you expect when we are bombarded every minute with messages to CONSUME! CONSUME! CONSUME!?

I'm proud to be debt-free since last year.

[ProfessorGAC]

38. Yes, But. . .

. . .the overbuying of homes (too high a cost for too big a house) roots the whole problem in that it forces too many people to leverage every other purchase in life. So, while this debt number doesn't include "good debt" like mortgages, the mortgage load is a fundamental root cause in creating this enormous level of debt.

And, as i also said in a different post, i completely concur with your "comsumerism" notion.
The Professor

[Yavin4]

39. CONSUME! CONSUME! CONSUME!?

This is truly sad, but what do you expect when we are bombarded every minute with messages to CONSUME! CONSUME! CONSUME!?

The worst offender of these messages? The News Media!!! This was a CNN tease right after the New Year:

"Get over those holiday blues with a winter vacation!"

People have just spent a fortune throughout Christmas, and now they're selling you a vacation. Recently, they've been hawking diet plans left and right.

There's little or no difference between our media and the Home Shopping Network.

[ochazuke]

56. Affluenza, people. It explains everything

It diagnoses our national obesity, debt problem, environmental troubles, hegemonic foreign policy, lack of good taste, EVERYTHING!

[ProfessorGAC]

36. It's Threefold

First, credit card debt is crushing in the U.S. Your $6k per person, is, btw, correct.

The credit card companies hate my wife and i, since we use them as charge cards. We use them, pay in full when the bill shows, up and carry zero balances. They make NOTHING to speak of from us. (The 0.75% of purchase price from the vendor, i suppose.)

Secondly, people have been encouraged for 20 years to overbuy in the housing market. Folks have been indoctrinated to believe that a home is an investment. This is only tangentially true. If you have a 30 year mortgage, then your "investement" must be worth at 3.2 times more (if you're mortgage rate was 7%, for example) to make a profit. Not really a good DCFROI. But, the "starter home" of today is a 2000 square foot, $220k purchase. This puts people in a hole right away.

On top of that, developments put into areas with no existing infrastructure require huge taxation levies that make these debts tough to pay down. So, the debt on mortgages are too high (banks use to limit mortgages to 2x the combined adjusted household income. Now, it's 3x.) So, the ability to rapidly paydown principal is diminished by high assessment.

Lastly, the proliferation of high priced SUV's have created a huge crush on car loans, where the $600 per month car payment is not atypical. (I am on the board of directors of a $150 million credit union. You would be shocked at how often people with $60k incomes, certainly not a bad living, are applying for a loan on a $60k vehicle.) So, the debt burden is added to by people buying more car than they need.

The consumer society has truly transformed us into a "i want it all now" crowd that has financed that desire with debt. It's no wonder that folks don't see the problems with gov't borrowing money to finance operations. Seems like par for the course.
The Professor

[expatriot]

17. There is a lot of burst left in this bubble...

[salin]

27. Debt - the New American past-time.

First a note on the reported household debt at $18,700 per household? Mind you there are some folks living more austerely (the old depression carryover carried on through some generations in some families) - who live by a no-debt rule. I would guess that this group lowers that 'average' a bit - and that if they just calculated those carrying debt the average would be a bit higher.

Along with consumer debt - we have corporate debt that is astronomical due to the merger/buyout frenzy that began in the mid-late 1980s, slowed a bit and then accelerated in the late 1990s through today. Each time a company acquires another - it accumulates huge debts that have to be paid through revenues (although we saw with Enron how easy it is to hide the level of debt and claim the revenues.) How in the heck did WorldCom get so big so quickly? Didn't a smaller company buy-out a larger one? And what happened there. When so much of revenues has to be dedicated to debt service there is less money for reinvestment, for paying other bills (like covering increases in health insurance - think: grocery store labor disputes), and other essentials. In short, there comes a point where productivity of the company declines. When wall street and others ponder how the "jobloss" recovery has resulted in a much steeper increase in productivity without much reciprocal increase in wages, or an increase in jobs, it is not ALL due to corporate greed and mismanaged corporate exec benefits (eg gouging by executives approved by boards) - a big contributing factor is corporate debt - often created through merger/acquisitions.

How were all those deals financed? Why through major financial institutions. Let's call this bank debt. Remember the stories surrounding the big corporate implosions (Enron, Worldcom, Global Crossings, Tyco, etc.) - there were a flurry of stories and twitters of nervousness when a number of major banks found themselves having to absorb huge losses due to very risky financing (think: JPMorgan Chase and Citigroup.) I read recently that the nature of the financing today is MUCH riskier in the past - that is, many banks have been 'investing' in riskier and riskier business ventures without taking the precautions they had in the past. I could be wrong, but I haven't heard a great deal of news about the banking industry revising its practices after the initial flutter of news after the corporate implosions of 2002. Are they still relying on the big Accounting firms who can still (through loopholes thanks in part to Zell Miller) be utilized as both the consultant and auditor. I fear there continues to be a bit of 'house of cards' going on, that is potentially very shakey. If I am incorrect - someone please add information to this post.

Then the mother of all American Style debt is government debt. State deficits on a smaller scale, but the real challenge is the Federal Debt. For a long time the US debt was financed through treasuries, and the notes were primarily held by US-based interests. But as we have reexploded our annual deficits - and the sheer amount being sold increased exponentially - there has been a dramatic shift. Today more than half of our burden (who is financing our debt) is held by foreign interests. There are so many potential problems looming around this point that I won't begin to spell them out (but think quickly - if the dollar keeps being devalued - do those investors keep buying? If not - what happens????)

So with debt becoming the norm, with the president telling people after a major attack that folks should take on more personal debt (go out and shop!), as if it is a patriotic duty, is the current situation any surprise?

[kayell]

43. I discovered a few years ago that having no debt can be a problem

I was trying to buy a house and discovered that I had NO credit, because I had no debt, because I had not used a credit card in well over 20 years. Every lender I went to rolled their eyes and if they were willing to lend to me, wanted to charge exorbitant interest. Most just suggested that I get a credit card, use it for a few years and try again later. :eyes:

Fortunately I came into enough money to put down 30% on a small house, so was able to buy. Still, everyone involved wanted me to spend more because I was not at the limit of what I could theoretically purchase on my income. I had set my own limit for what I felt I could afford/ was willing to spend. Some people were quite rude about it.

My boss is quite offended when we have to go on trips that I refuse to own and use a credit card. We are expected to put everything on credit and have the university reimburse us 4 to 6 weeks later.

The pressure in this country to live beyond your means, to keep up appearances is so pervasive that it is almost impossible to avoid. I am truly fortunate to have been raised it a family that places emphasis on things other than material wealth, and values feelings and behavior more than things. When I see what other people spend and waste it is shocking.

Even with all the good influences in my life I still succumbed right out of college to the credit lure. It seems that most people do not learn from that early mistake (almost everyone has a story to tell, that they won't tell), but continue to do it over and over again. The level of debt that most people carry, and their shame in it is partly so severe because people don't talk about this. Everyone trys to maintain an image of wealth in this country, because we have been trained to believe that being less than wealthy is bad. Poor people are bad. They must be irresponsible, lazy. Therefor people will do almost anything, including sinking themselves into staggering debt to avoid someone thinking they are not well to do.

Combine that with constant messages about the next best thing, the best car, the ultimate lifestyle on tv, on the roadside, in schools, everywhere you go. The bar that people must leap to appear as prosperous as one "should" is constantly being raised. My brother and I both own small houses built in the 40s and 50s. They each have only 2 small closets, and that was partly why both were very inexpensive - they were "undesirable", too small. How many clothes do people need? By the 60s the norm was a double closet in the master bedroom, by the 70s a double in every bedroom, 80s walk in closets in the master. Now people are building a full scale room for each spouses clothing. Am I "poor" because I have only 1 small closet in my room? Some would think so.

The worst of it is that not only are Americans spending themselves into unconscionable debt to avoid someone thinking less of them, but that all that image enhancing spending and acquiring of stuff is done at the expense of every other person and organism on the planet.

[sendero]

48. It's easy...

... to have a credit rating without incurring debt. Simply get a credit card and pay it off in full every month.

I have one that pays me $100 for every $5000 I charge (2%) and I never pay them a dime of interest. Credit cards should be used as a convenience, not as a source of borrowed funds.

[kayell]

50. Thanks, but no thanks

I won't own one. Debit cards work just fine and there is no risk of making mistakes. I've seen too many people who think that method will work and a few years later are deep in debt. I'm happy if you are not one of them, and perhaps I wouldn't be either, but I see no reason to buy into the credit card scam. Got my house, got my low interest rate. I hate it that everyone seems to think cards are a neccessity of life.

[ozone_man]

32. "but not mortgages"

Well then I guess we're not looking at the debt accumulated in the last two years with all the refinancing. I'd say it's a lot worse than what this shows.

[sendero]

49. I'm not sure...

... but I think mortgages are handled differently for a reason.

Mortgage debt is theoretically 100% secured. That is, the loan balance is never supposed to be higher than the value of the house. And of course, if you default on a mortgage - you will find yourself on street pretty quickly.

On the other hand, almost all other consumer debt is unsecured. Now, you probably have a lien on your car by the loaner, but even so there is not much guarantee that the car's value would pay off the loan.

Credit card debt is unsecured, as is most other forms of "consumer" debt. Basically, if you don't pay the creditor has little recourse other than to harass you :)

So, on some level it makes sense to treat mortgages differently, since that debt is (theoretically, becoming less true every year) secured by real property.

[Yavin4]

52. Question

What happens if the assessed value of the home is less than the mortgage remaining on the home. It has happened before.

[ozone_man]

55. It may happen more frequently

in the future as real estate bubble bursts.

My question regarding debt was really overall debt. Well, I guess if it's secured, then technically it is not debt, but the payments to stay "off the street" may degrade that precious GDP number and the economy on the whole. The cash from refinancing is running out and we are also living off of tax cuts, while ballooning the deficit.

[sendero]

58. Nothing....

... unless you don't make the payments. At that point, the property will be foreclosed and the mortgage holder will take posession. If the value of the house is lower than the loan - I *think* that PMI (Private Mortgage Insurance which is required in Texas for any mortgage for more than 80% of the appraised value of the house) kicks in and makes the mortgagor whole.

I don't know if PMI is a nationwide thing, but I think it is on all FHA-financed homes. PMI is evil IMHO, because it has allowed mortgage lenders to abrogate their responsibility in underwriting loans. If is it not paid off, they are covered. And who pays? The responsible homeowners who are forced to pay for PMI.

[goforit]

51. Hey.....why not join the party....In Debt rules!!!

Total chaos in our New Banana Republic!!!

[creativelcro]

53. If you add the mortgages it gets scarier...

Why weren't those added ? People still have to pay those, and they are the largest debt for most families...

[osaMABUSh]

54. "Transforming Debt into Wealth" is a wake up call

I'm reading (actually listening to) "Transforming Debt into Wealth" by John Cummuta. The basic premise is have interest work for you rather than against you: get out of debt, pay off everything, and invest your money. And do this all in 5-7 years.

The "only" debt I have is a 0% car loan and a 5% home loan. But the payment on the house is only 10% of the principal so effectively the interest rate is 90% (OK, 72% after the tax 'break'). A bad deal.

Paying down my mortgage has become a goal - no more minimum payments.

His book woke me up to the credit trap. We are told to be a good consumer and a good American by consuming and spending every penny on SUVs, vacations, bigger houses than we need, etc. then retire at 65 and live on cat food and crackers.

[creativelcro]

60. regarding your home loan... Remember the tax implications...

Otherwise your calculations may be off.

[creativelcro]

62. It's a huge Ponzi scheme...