Posted on 09/26/2009 7:57:31 PM PDT by TigerLikesRooster
US debt contracts for first time in decades
GARETH COSTA, The West Australian September 26, 2009, 4:08 pm
A number like $US122 billion ($140 billion) appears insignificant when related to the trillion dollar problems in the US economy, but when it represents the first contraction of gross US debt in decades the implication for global recovery is daunting.
Total US debt, that includes bond debt issued for the bailout packages, fell in the second quarter of this year after continuing to expand right through the global financial crisis, according to data released by the US Federal Reserve Board.
US federal, state and local debt increased by $390 billion, but financial sector debt plummeted by $590 billion and household debt fell by $133 billion.
Even through the heart of the crisis US debt grew by $US466 billion in the December quarter and by $US378 billion to a peak of $52.5 trillion in the March quarter this year, but this news is the first proof of deleveraging in the US economy.
(Excerpt) Read more at au.news.yahoo.com ...
Ping!
“a peak of $52.5 trillion
how many zeroes is that?”
Just one and he’s in the White House.
These stories keep throwing me off; I keep thinking they mean National Debt/Public Debt not personal debt.
Or flat out defaulting. But yes, the US is starting to deleverage.
I would like to see a breakdown of how this debt was reduced between paying off the debt, and defaulting on the debt.
Debt = money and money = debt.
This, in turn, translates into a loss of all the loans that could have been leveraged off of that base amount by the banks.
This shows that we are spiraling into deflation - not inflation as most people misread it.
underthestreetlite wrote:
the financial sector offloaded all that debt, perhaps a lot of it toxic, onto the taxpayers - thanks to Bernanke, Paulson and Geithner - wasn't Bernanke reappointed the Fed Chairman for another term
Although that was the whole purpose of the TARP, it never actually happened.
Helicopter Ben and TurboTax Tim did varioius things with parts of the $700,000,000,000 of the TARP funds, but they ever actually purchased a single “Troubled Asset” from any financial institution. Oh, and Bush made loans to GM and Chrysler from the TARP funds, and Obama even bought stock in GM and Chrysler with some of that TARP money as well. A lot of the money is still sitting in the TARP accounts, and some of the money that Helicopter Ben dropped on preferred shares of the banks has been paid back. And some of that money is earning dividends from those preferred shares at a favorable rate.
When TurboTax Tim was asking for an increase on his credit limit (the debt ceiling) at a recent hearing on the hill, some of the Republicans were suggesting that he could return these unused and repaid TARP funds to the treasury and delay the need for further borrowing and any need to increase the debt ceiling for several months.
But the dirty little secret is that every bad loan, every shaky “Mortgage Backed Security” that was in the system back in October of 2008 is still in the system today. Some have degraded further, going into foreclosure and such. But nothing was ever sold to the government under the TARP program. A lot of non-performing mortgages are sitting in limbo today. Way past due, but the banks or owners of the “mortgage backed securities” don’t want to pull the trigger and actually foreclose because then they will have to actualize the losses and take title to the foreclosed properties which are worth significantly less than the current “value” of the loans.
| From the desk of cc2k: |
point well taken
That means people will save to have more equity inside of any borrowing regimes. Or it means they may borrow far less.
In other words we may be evolving to a conservative style economy , that runs more slowly , steadily, and more cooly. Not quite as hot. It also means a drop in our livinng standards over the short term, less foreign trade.
This is actually good news for an authentic recovery, but it also may mean a double dip recession.We are barely at the half way point of the curve, with another 2 to 3 years to go, IF we do not have a war.
But this is only the US economy. Other economies still remain highly leveraged.
I believe that much of this debt is being transfered to the big Federal deficit. Now there is talk of adding a value added tax to pay for it. And the borrowing goes on. The American people have really been had by all the fraud.
It’s a drop in the money supply rather than the monetary base.
The monetary base has been growing very rapidly, a fact that has many thinking that inflation is about to ignite. The flaw with that prediction is that it ignores the deflationary impact of this collapsing debt, which has been large enough to overwhelm the new money being created by the Fed.
All of that, and the fact that even greater amounts of debt are going into default and will never be paid back.
And that’s why we are going to have another very big leg down. This recession/depression is far from over.
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