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http://www.nytimes.com/aponline/business/AP-Debt-in-America.html

Average debt per household, not including mortgages (or, I think, student loans) $18,700.
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Sorry, I could not access article that you linked, but do you know if the debt total also excluded home equity loans?

Thanks,
Craig
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Craig,

All you should need to do is sign up for NY Times, which is painless (I told them to leave me alone and I don't believe they are the source of any of my viagra substitute or other Spam).

Not much detail in the article, but a fe excerpts:

Consumer debt hit a record $1.98 trillion in October 2003, according to the most recent figures from the Federal Reserve. 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.

Experts worry about the impact not only on individual families but on society as a whole.

...

The nation's credit card debt currently stands at $735 billion, or nearly $7,000 per household. And since about 40 percent of card users pay their balances in full each month, the household card debt of those who carry balances is closer to $12,000.

...

There's debate about how the high debt levels and demanding repayment schedules will affect the economy.

Americans currently spend a near-record 18.1 percent of their after-tax income to cover debts, including mortgages. That limits their ability to borrow more to spend more, and consumer spending accounts for about two-thirds of the economy.

Federal Reserve Chairman Alan Greenspan has pointed out that because of low interest rates, consumers can more easily handle their debt so the level is ``not a significant cause for concern.'

Economist Sung Won Sohn of Wells Fargo & Co. agrees that for now, most Americans are OK and should continue to be the driving force in the nation's economic growth.

Still, he said, the level of debt does raise concerns.

``In the long run, it's a ticking time bomb,' Sohn said. ``At some point when you get a sharp setback in the economy or a spike in interest rates, the high debt causes instability.'
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``In the long run, it's a ticking time bomb,' Sohn said. ``At some point when you get a sharp setback in the economy or a spike in interest rates, the high debt causes instability."


The continuation of consumer spending, in the face of prolonged and increasing un/under-employment, has been of wonderment and concern to me. I note that friends that have been participating in the re-fi trend have mostly taken cash out to consolidate their credit, only to be rebuilding their credit card balances again.

While people are high-fiving each other on the latest economic news and the resultant effect on the markets. It seems that if the employment opportunities don't open up, that there is a house of cards gaining exposure to the wind.

Mind you that my observations may be skewed since many of these friends are in the IT industries. They seem to continue to leverage themselves in anticipation of that employment niche to expand and pay handsomely again.
While tech will/is no doubt expand(ing) again, my belief is that is an industry that has little hope of having their job exportation to be reversed.


Re: NY Times registration
I went ahead and signed up last year after Loki's assurance that he wasn't getting Spammed as a result. I have yet to get any Viagra alternate or Paris Hilton video offers semt to my Yahoo! address mailbox.
In fact, the only Spam I ever get into my public address mailbox seems to be the PayPal spoofs. Most likely caused by infection of people's PCs that saved that address from the message boards that I participate.
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I note that friends that have been participating in the re-fi trend have mostly taken cash out to consolidate their credit, only to be rebuilding their credit card balances again.

When I refinanced my mortgage, I had to tell the loan officer several times that I was not taking cash out, and furthermore I wanted to pay cash for the closing costs instead of folding closing costs into the new mortgage. My impression was that most of his clients were taking equity out or at least folding closing costs into the refi.

A few years ago I did some google searching and came across a report on the FDIC site about high LTV loans--a company surveyed a number of borrowers and within 1 year 70% of them were back in credit card debt.

In fact, it is so common for people to drive back up the balances on their credit cards that the industry even has a term for that: reload.

Informal observations in the Consumer Credit / Credit Card board confirms the 70% ratio with some insight: people who made use of home equity loans, 401(k) loans, or borrowed from parents to pay off the cards, but didn't have a definite debt elimination plan, usually ended back in credit card debt (they "reloaded" their credit cards), with the result being worse than if they hadn't taken out a loan to refinance their credit card debt. On the other hand, those who had a definite debt elimination plan and were sticking with it and used such a loan were usually successful in staying out of credit card debt.
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I get lots of SPAM, but the way it's addressed, I'm pretty sure it comes from having had to register with Apple to download software. Definitely not how I'm registered with the Times.

I don't think the doubling of debt mentioned by the Times is inflation adjusted (though they didn't say). Still, this has not been a high inflation period. At some point, a consumer driven economy can't continue with this level of personal debt. And real income for the vast majority of Americans (not averaging using increased incomes of CEOs, etc.) has seen little increase over the last 30 years, most of that during a spurt in the late '90s. Wage competition bodes poorly for increased wages in the future, including for many IT workers.
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To add to the previous posts, I notice that many companies are advertising, "No interest until 2005." The fine print adds that if the balance is not paid off within 12 months, then the interest will be due for the previous year. This sets another debt trap for the unwary.
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In fact, it is so common for people to drive back up the balances on their credit cards that the industry even has a term for that: reload.

I'd venture that we all know some folks that have multiple "reloads". Hell, I've done it myself before I adopted a LBYM way of life.

Despite the best of intent, I just dug myself back in after consolidating my CC debt. Finding myself again mired in a high CC balance was the awakening I needed to dig out and stay out.


And real income for the vast majority of Americans (not averaging using increased incomes of CEOs, etc.) has seen little increase over the last 30 years, most of that during a spurt in the late '90s.

This coincides with the migration towards the prevalence of dual-income households. Nowhere else to go now - short of child labor. Thus my concern that there is a potential cascade to be released if employment doesn't expand fast enough.
I doubt that there's a way to reverse the mindset that indebtedness is just a way of life for middle America.
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Yeah, Ted,

I took advantage of Sony's offer a couple of years ago for free float in buying our 36 XBR. We paid it off two weeks ahead of the deadline just in case there was some snafu. The float was nice, but you do have to be careful. I think the payoff deadline was continually in the back of my thoughts.

db
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"I took advantage of Sony's offer a couple of years ago for free float in buying our 36 XBR. We paid it off two weeks ahead of the deadline just in case there was some snafu. The float was nice, but you do have to be careful. I think the payoff deadline was continually in the back of my thoughts."

Seeing as how I have to take a special walk to the mailbox to send in a big credit card bill (below zero and icy)....

For those of us who use credit to delay payment, cut down on payment expenses (checks, stamps), and for convenience and ease of keeping track, the zero-interest if paid off on time thing is great. But you do have to be vigilant about bill paying and you do have to have the money to pay the bills.

It's again frustrating to watch my in-laws, who fear credit cards, create extra work by not understanding how to use them for convenience. We've had to take them on extra trips to the bank (or I've had to get cash and deposit checks written to me) and they've cancelled their previous (only) credit card, with the idea of getting one from their new bank, meaning they can't buy anything without a check, so they have to keep more money in their zero-interest checking account, instead of the money-market. They also had such a low maximum on their one card, they couldn't cover payment for the mover, so they were holding onto a huge cashier's check for a week, since they didn't know when the mover would arrive, needless to say a lot more dangerous than a credit card.
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I doubt that there's a way to reverse the mindset that indebtedness is just a way of life for middle America.

I've had several people tell me that "You'll always have a car and a house payment."

No thank you. Just give me a couple more months and that car payment will be gone...
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No thank you. Just give me a couple more months and that car payment will be gone...

I haven't had a car payment since the mid '80s. Congratulations on your upcoming last payment, but a suggestion (that you may already be planning on doing): Keep making the payment, but to yourself. Even increase it if you can, so that by the time you need to buy a new car, you'll have the money available to pay cash.

You've got to pay the money any way, one way or the other. You might as well collect the interest, instead of paying it out. :-)

Ken
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I would do that, but I plan on using that money to hit my snowball for my student loans...
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I will not bore you with repeating the shocking figures with respect to total debt(public+private)which undoubtedly will continue to grow at least for the next two years. Apparantly the current administration is willing to spend whatever it takes to get reelected.I presume but obviously don't know for certain,they expect that in their 2d term to be able to drastically cut back spending in order to begin to bring the budget back in line.Of course it is the appointments that will be made to the Sup. Court that makes this risk accepable for conservative Republicans. IMO once programs are established a constuantcy is created which makes such rollbacks highly unlikely.Therefore one must question how such total debt will be handled.I see only one tried and true answer-INFLATION. From an investors point of view this makes dollar denominated debt of more the a few years duration a BAD,BAD idea(except for TIPs,etc.). For now I sticking with equity-with mental stops and some Puts to protect profits and to take advantage of the existing momentum. The trend's my frien although a LOT of stocks are IMHO overvalued.
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I have never had a car payment other then when I bought a Lexus a couple of years ago for my wife and they offered me an additional $1500 rebate if I took a loan. I was somewhat skepticle because they told me I could pay the loan off in one month and I would still get to keep the $1500. I wrote these terms on my PO and took the shoot.I must say they were entirely honest. I paid off the losn and got to keep the 1500. I later inquired of the dealer why Lexus would have such a promotion. I can only conclude that very few actually prepay the loan and pocket the 1500.
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GreyFox,

Americans love, "No money down," "Buy now, pay later." That's also what "we" want to hear from politicians. No Jimmy Carter realists. "We" want optimism.

We (no quote marks) are headed for a cliff. With Reagan's voodoo economics, there was an immediate pullback from its extremes, and further measures—cuts and tax increases—down the road. There are no more easy cuts (at least ones that would have any impact) and the real fiscal conservatives are a dying breed. Boomers are in no position to retire (even if the stock market does well, thanks to smoke and mirrors, not earnings), but they are vulnerable to mass "downsizing." At some point, debtors can't keep borrowing.

You think you can time the market as you rprotection. I don't. Hence, diversification and laddering, with heavy emphasis on cash or equivalents for likely lifetime.
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You think you can time the market as you rprotection. I don't. Hence, diversification and laddering, with heavy emphasis on cash or equivalents for likely lifetime.

Am I alone in feeling perpetually stymied? I was starting to feel like the fog in my crystal ball was starting to clear, only to discover that it was just the lighting momentarily providing the illusion.

All the cash sidelined in primarily MMA's with a couple step-stooled CD's (1 & 2 yr) looked like it was ready to start returning to bonds later this year.

Then, with the oversea banks starting to correct their currencies for the deflating dollar, I'm thinking, 'move the MMA funds to a full ladder of CD's'. Maybe the paltry yields are as good as they get for a spell. Hell, Japan is talking about firing up their money presses (I presume since their treasury yields unable to get off 0%).

After last night, I surmise the agenda is to continue to stem the Fed's income stream and increase spending. I guess one is a Centrist if they play both the Right and Left at the same time - nah, this can't be politically motiviated, there must be a long term vision that I'm too blind to see!
Oh, while were at it, let's slow feeding of the legal pyramid scheme (though I'm not sure that's not the right thing to do for the really long haul).

Now, I think I'm back to being entrenched on the sidelines...I'm too confused to make a move. My crystal ball is going from foggy on the inside to sandblasted on the outside, but I'm still not ready to toss it in the trash.
Aaaaaaaaaaargh!!!!!!!!!!! The market timer part of me is lost in a Catch 22, as my analysis-paralysis continues to be irreversible. Maybe it's just part of the middle age process for me. I finding that the Gregorian chants of "diversification" are going from being boring to soothing.
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Household networths are near all time highs.

GDP grows and grows.

Public debt relative to GDP dropped in the late90s and even this year,
US govt deficit lags economic growth.

YES credit rises, as it has since it was invented.

For those who can' affor it, ots bad for everyone else,

its good.

Per a post on the CCard borad.

MNBA stks is up an avg 21% over the last 10 yrs.
Whilst CC users are paying 15+ %. Huge returns are being earned
and some accept huge costs to borrow.
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