The Phaserl


No, Higher Household Debt Is Not a Good Sign

by Brittany Stepniak, Outsider Club:

Household debt – which includes mortgages, credit cards, car loans and student loans – rose $129 billion in the fist quarter, to $11.65 trillion.

That was the third consecutive quarterly increase.

And it’s really not shocking, when you consider the job market is still bad and prices are rising faster than wages, which are stagnant.

However, I was surprised to see that some economists heralded the new data as a postive sign for the economy, suggesting consumers are “more confident.”

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1 comment to No, Higher Household Debt Is Not a Good Sign

  • rich

    Stress Test: The Indictment of Timothy Geithner

    The Fed and the Treasury held all the cards in dealing with the financial industry. Any firm that was publicly cut off from access to special Fed lending facilities, and denied Treasury, Fed, or FDIC loans or guarantees, would have soon been toast in the crisis atmosphere of this period.

    Anyone reading the book will have little doubt that it is the bankers who ultimately enjoy Geithner’s sympathy. Based on a study of bankers’ home buying behavior he tells us that they were not acting criminally, but rather were caught up in the irrational exuberance of the housing bubble, as though these were mutually exclusive possibilities. It is likely that many of the top criminals in Enron ultimately believed in the company’s business model. That doesn’t mean they didn’t break the law. In the same vein, bankers may have knowingly issued and securitized hundreds of thousands of fraudulent mortgages even if they believed that ever rising house prices would make every mortgage a good mortgage.

    Geithner also briefly comments on the efforts of Erskine Bowles and formers Senator Alan Simpson to craft a deficit reduction package. He says the effort to have the government live within its means is “a fight worth having.” Given that the major problem now and for the foreseeable future is a lack of aggregate demand, and therefore a government deficit that is too small, many might think that educating the public on the relationship between the deficit and demand and employment is a fight worth having, but not Timothy Geithner.

    The reality is that we had a completely preventable economic disaster hit the country. The result was millions of people losing their homes and/or their jobs, in many cases seeing their lives and the lives of their children ruined. With almost no exceptions the policy makers responsible for the disaster and the bankers who profited from it are doing just fine. And Timothy Geithner can’t understand why everybody isn’t happy.

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