livinglies.wordpress.com | August 14, 2016
by Neil Garfield
Bloomberg is claiming that the U.S. economy is “growing”, inflation is “low”, and there are “lots of jobs”. Bloomberg wants you to drink the Kool-Aid and ignore that assets are more over-valued than any time in history. Stocks, bonds and real estate exist in an inflated, unsustainable bubble.
Bloomberg also says Americans are broke. When they add up their debts and liabilities.
One in seven U.S. households has a negative net worth…if the next crash occurs six out of seven U.S. households will have a negative net worth.
Bloomberg reports that Americans are doing better at managing their debt than during the dark days of the housing bubble that led to the Great Recession. The total debt load is up 10 percent from the middle of 2013 but is 3.1 percent below its 2008 peak. The biggest improvement since the recession has been in housing debt, which is still more than $1 trillion below its peak.
Debt-levels are not spiraling out of control like they were before the crash of 2008 because American consumers have maxed out their credit lines again and the banks have stopped lending. According to Bloomberg the U.S. economy is in full recovery.
One in seven U.S. households has a negative net worth, as student loans and credit cards plunge a diverse group of people—including those with good jobs—into the red.
Poverty occurs because you simply don’t have enough income or you are over-leveraged with debt. Almost 15 percent of Americans, or 47 million people, live below the poverty line, according to the U.S. Census Bureau.
People with good jobs can owe so much on credit cards, student loans, or mortgages that, on paper, they’re worth less than zero. About 14 percent of U.S. households fall into this category, with a negative net worth, according to an analysis this month by the New York Federal Reserve. When you add up all their possessions—cash, property, retirement accounts—and subtract all their debts, one in seven Americans have a negative net worth.
Overall, U.S. households hold $12.3 trillion in debt, according to another New York Fed report, released this week. Credit card debt and student loan debt are the main reasons Americans are ending up with a negative net worth. Mortgages are a minor factor, according to the New York Fed. Only 19 percent of people with negative net worth are homeowners, compared with 75 percent of those with positive net worth.
The Real Estate Bubble-version 2016 has the potential to destroy the net worth of millions of American homeowners who have few assets outside of their personal residence. Bloomberg failed to explore how a correction in inflated housing prices could decimate the majority of Americans.
Back to August 2016 Archive
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