Monday, February 23, 2009

Mortgage Debt as a Percent of Disposable Income

Debt is typically the cause of every major recession and depression throughout the history of the world. Through easy credit, people borrow money they can never hope to repay either investing it in foolish things such as Dotcoms or Tulip Bulbs, or perhaps not investing it at all, preferring to do the American thing and buy SUV's, trips to Europe or degrees in philosophy for their spoiled brat children.

This triggers a recession because the funds borrowed could have been lent to the productive members of society and thusly invested in much wiser and productive things, but since they weren't, this results in a decrease in production which is the definition of a recession.

Now I caught a lot of flak for my posting Canada might be a better place to live in the near future, but again, to show that this is not just some whim or me being in a foul mood, take a look at who has been abusing their mortgage debt;


It is an obscure statistic, but mortgage debt as a percent of disposable income is a way to measure how much debt different people in different countries take on relative to the only thing that can pay it back; disposable income. Again, surprise, surprise, our Canadian brothers to the north have taken a more conservative stance and is why they will not suffer as much as their southern neighbors.

The scary thing, is mortgage debt isn't the only kind of debt. There's government debt, corporate debt, student debt, you name it. And when you add it all up, never has the US had more debt relative to GDP (second chart down). And when you look at what we're spending this veritable mountain of debt on (the stimulus, propping worthless auto companies, handouts and welfare) what possible semblance of future production can we expect?


Anonymous said...

This country's economy is SO screwed that I'm amazed anyone can keep their head from blowing up! We're just around the corner from becoming a civil War Zone, so get ready!!

Econmom said...

OK - I had taken you off my blog because all you were doing for a while was ripping on the deadbeats. I agree, they are deadbeats. But the tone was getting a bit negative for me. I know your site is popular and you don't need a link from mine at all, but I am adding you back on - your recent posts have been more like the ones that got me reading in the first place. Your analysis and insight are much appreciated.

Anonymous said...

People get so wrapped up in the "THIS IS ARE CUNTRY" type of talk. The US has been the greatest country on earth for the past 200 years. It has been the greatest country not because of its name, or location, but the constitution and its people. Now today's average Joe is not the same caliber of person that the average Joe was in the 1940's, and these lesser people are bastardizing the constitution. This is leading to the downfall of the US. We will not always be the greatest country on earth, so enjoy it while it lasts. I hope it doesn't come about in my lifetime, but with the pace we are rolling downhill, I can't say I won't be surprised. The question is, as Captain's $1,500 research points out, who will be the next great up and coming nation?