The Debt Bomb: Only housing is keeping the fuse on America's borrowing habit from burning down

Barron's On Line ^ | 20 January 2003 | JONATHAN R. LAING

[Alberta's Child]

My grandparents [not illegal but vile Mediterranean immigrants nonetheless] settled in the older run down sections of town. Now me upwards of 25 of my cousins live in $200k to $700k homes. We count one millionaire amongst us, too.

You hit the nail right on the head. That $700,000 home will only be worth $700,000 as long as someone is willing to pay that much money for it. What people don't understand is that Americans are not replacing themselves adequately enough to make the economy grow naturally, so there is a real possibility that the guy who buys that house for $700,000 in 25 years is now a 10-12 year-old kid wading across the Rio Grande with his parents.

Because I've got news for you -- if that kid ain't around in 25 years to pay $700,000 for that house, then nobody will.

[staytrue]

Credit-market debt now equals 295% of gross domestic product, compared with 160% in 1980 and less than 150% during much of the 1960s

We've had a flame war on another thread, but I think this article is about the debt in this country is more relevant about why the economy stinks, than blaming globalization, illegal immigrants, bush I, bush II, ford, clinton, or whoever. A debt of 23 trillion at an avg. interest rate of about 6 percent is 1.4 trillion dollars wasted on interest payments for which you get nothing. This is about 14 percent of gnp. Our trade deficit is a mere 500 billion and at least we get a vcr, shoes or something in return.

[RLK]

Cycles of debt and the need to stop buying definately affect the economy. However, it is only part of the problem. I've given my analysis, including a 35 page economic paper. Discussing and refuting the same thing over and over is becoming tedius. Little of what I have said has been taken seriously. I have no more to offer.

[snooker]

>>>As soon as I see comparisons between the U.S. and Japan in an article like this, I tend to question the author's credibility.

Yep, using this socialist government managed country as a gauge of anything is way off the mark.

Remember when libs (during Reagan's terms) thought deficits were no problem at all. And Clinton submitted budget projections with deficits as far as the mind could imagine, all over $200 B a year. He also showed the tax rate going to 85% across the board. Consequences of fewer and fewer people paying more and more of the tax bill.

I think I had a brain fart just trying to follow this article's circular reasoning.

But the bottom line seems to be Republicans are going to blow up everything. Does that sum it up? Just look at how many trees it took him to say that.

bill

[ggekko]

Okay. Here is the redacted version:

*Past deflations in the US and abroad occured
when debt service became unmanageable due to
exogenous shocks to the world economy,

*Gross debt ratios are starting to become problematic
in the US based upon historical norms,

*The Chinese are causing a deflationary wave by
dumping goods in the world market using their
undervalued currency,

*The Fed has, until recently, been less than alert
to the deflationary threat.

The real culprit here was missed by the analsysts, in my view. Mercantilist trade policies pursued by any number of countries has led to a chronic oversupply in a number of industries. The businesses in these industries (steel, autos, textiles, consumer electronics) find it hard to make money because are mired in suicidal price wars.

[radioman]

Some of us (or at least one) are not financial-savvy and business articles like this make me brain-sore - would someone mind translating this into simple layman's language for a simple mind? TIA -

Time to stash some cash under the mattress.

[meadsjn]

Could you provide a link to your article? Thanks.

[Red Jones]

thanks for flagging me

[SierraWasp]

Thanks for posting this intensly interesting article!

[staytrue]

Could you provide a link to your article? Thanks.

Yes, I will ditto this request. I would love to see your self proclaimed knowledge and brilliance in its full glory.

[RLK]

Could you provide a link to your article? Thanks.

--------------------

Go here:

http://members.mountain.net/theanalyticpapers/ch243.htm

[RLK]

Please don't read my published material. You are unstudied and determinted to remain that way. You have little aptitude for learning. You don't learn from experience, you own or anybody else's. You are insincere, and have a lousey attitude. The material is not meant for people like you. I don't want to be bothered you you or your infantile carping and sarcastic comments. comments.

[meadsjn]

It's a long read, but well worth it. I hope you got something for it besides ulcers.

[RLK]

Glad you liked it. It is being circulated in various places. That one was easy and fun to write. The one following the one I am working on now will be a Viet Nam series update, and will be easy and fun. The piece I am working on now is hard. I've been wrestling with it for four months. I get paid. In scientific/engineering writing I got up to $2,000 an article. Political/economic analysis does mot pay that mush at my level. Some of my papers are more than 60 pages long and it requires a special publication to publish them. I've published close to 1,000 pages in the last several years.

[RLK]

I think the important thing to understand at the present is the concept of absolute necessity for a worker/management\investor optimum income equilibrium in a market economy.

[Richard Kimball]

Bump

[meadsjn]

Yeah. I too occasionally experience the optimistic fantasy that we really aren't being systematically squashed like bugs.