Beginnings of default on debt in U.S. economy (October 2023) - Politics Forum.org | PoFo

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#15292395
Signs that people are beginning to default on debt. This could be an indication of a looming recession, as the U.S. economy finally begins to "unwind".
Not really too unexpected, considering so much of this buying was being fueled by debt.


Home foreclosures are on the upswing nationwide

Home foreclosures up 34% from same time last year, which includes default notices, scheduled auctions and bank repossessions -- surged 28% in the third quarter to 124,539.

The report also indicated that there were 37,679 properties with foreclosure filings in September -- up 11% from the previous month and up 18% from 2022.

Although foreclosures are on the rise, they remain well below the levels recorded during the 2008 financial crisis.

Foreclosure starts are nearly back to where they were two years ago when the federal government lifted a pandemic-related moratorium on most foreclosure filings. This rise in foreclosures might also be attributed to pending filings finally processing.

The hit comes at an already precarious time for the housing market, thanks to the astronomic rise in mortgage rates over the past year. In fact, housing affordability is worse today than during the peak of the 2008 housing bubble.​

Home foreclosures are on the upswing nationwide, Megan Henney, Fox News (Business), October 17, 2023


Americans Are Overdue With Their Car Payments At Highest Rate In Nearly 30 Years

Higher car prices and rising interest rates are hindering car owners’ ability to afford their vehicle payments, as 6.1% of subprime auto borrowers are at least 60 days past due on their loans, the highest percentage in data dating back to 1994, according to Bloomberg, which cited Fitch Ratings.

Margaret Rowe, a senior executive at Fitch, said subprime borrowers can be the first indication of where we start to see the negative effects of macroeconomic headwinds. Interest rates for used cars are 13.5% on average for those with fair credit but can rocket up to around 21% for those with the worst credit.​

Americans Are Overdue With Their Car Payments At Highest Rate In Nearly 30 Years, by Antonio Pequeño IV, Forbes, October 21, 2023

older related thread:
Unable to afford homes, Americans dive into subprime auto debt

I predict we might also begin to see an uptick in defaults on student loan debt.
The Biden Administration postponed payments on student loan debt, but that cannot continue forever and set to stop soon.

Market analysts are also expecting defaults on commercial real estate loans in the next one to three years. Especially from office buildings in mid-sized cities that have less wealth. About 10 to 15% of total bank loans are on commercial real estate. Currently many of these buildings sit partially abandoned.
I think it is because many medium-sized businesses have been trying to cut costs because their profits are down, but also because remote work has become more common, where office workers work in their own homes and communicate through computer. Renting actual space in a building is expensive.
#15292396
@Puffer Fish, this is Private debt, not US Gov. debt. They are totally different.

We saw this back around 2007 to 2009 during the GFC.

MMTers do say that private debt is a huge problem. The economist Steve Keen has been saying this at least since 2003 when he predicted the GFC.

The basic problem is wages are too low and profits are too high. So, the people borrow. And, banks foolishly lend to them. Unless they want the collateral.
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#15292424
Puffer Fish wrote:1] Are they [Private debt and US Gov. debt] really so different? 2] Why can't they be treated the same?

I think there is some connection.

The U.S. government is not going to be able to afford any gigantic bailout, this time around.


1] OK, finally you admit to your belief that is the basis of our disagreement.
In the old days the western world was on the gold standard. In those days you were basically correct, the people, corps, states and the US Gov. had to get dollars to spend dollars. That ended in 1971. Now, the people, corps, and states need to get dollars before they can spend; however, the US Gov. does not need to do this. In a crisis it doesn't. It just spends the money. We saw this during the covid pandemic, when at least $5.5 trillion dollars were spent without a single Congress person asking "How will we pay for this?"

They can be treated the same, but it is exactly the same as a businessman being willing to leave money on the table in a business deal. I believe that for the Gov. to not do what is necessary for the good of the nation when "the money is there on the table to be used, but we (the nation) refuse to use it for 'a stupid reason', is not just stupid, it is despicable. It is evil. I'm sorry that you disagree. You seem to cling to that stupid reason like your life depends on it.
. . . I'm not saying that you are evil. I'm saying that for the US to not be willing to create $100 trillion to save civilization from destruction by ACC is evil. Not that $100 T will be necessary, I just chose a large number to make my point. I'm not one to pull my punches, which is why I'm willing to be a doomer and call for panic to motivate people. They have not been motivated yet by downplaying the threat. It is time for panic. Like Greta says, how dare our leaders refuse to act?
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#15292494
Steve_American wrote:They can be treated the same, but it is exactly the same as a businessman being willing to leave money on the table in a business deal. I believe that for the Gov. to not do what is necessary for the good of the nation when "the money is there on the table to be used, but we (the nation) refuse to use it for 'a stupid reason', is not just stupid, it is despicable. It is evil.

In my opinion, the U.S. already did spend the money. The U.S. is $33.6 trillion in debt, and soon the interest payments will start eating up over a third of the government budget. It's hard to imagine the U.S. could just borrow or print more.
There are already worries about inflation, the U.S. Federal Reserve Bank realises it can't keep holding down interest rates without causing more inflation.

The current round of Treasury bonds are going to become due and the government will have to borrow money from somewhere else, at current interest rates. I doubt they can afford to.
#15292507
Puffer Fish wrote:In my opinion, the U.S. already did spend the money. The U.S. is $33.6 trillion in debt, and soon the interest payments will start eating up over a third of the government budget. It's hard to imagine the U.S. could just borrow or print more.
There are already worries about inflation, the U.S. Federal Reserve Bank realises it can't keep holding down interest rates without causing more inflation.

The current round of Treasury bonds are going to become due and the government will have to borrow money from somewhere else, at current interest rates. I doubt they can afford to.


With the Gov. frozen by the inability of the MAGA Repuds to choose a House Speaker, and on the way to a Gov. shutdown, it would have to sells bonds that the Fed buys like Japan has done.
It it not inevitable to shut down the Gov. and freeze it, it is a choice being made by the Freedom Caucus of the MAGA Repud Party. It just shows what happens when the current MAGA Repuds are called upon to actually govern.
Maybe you approve of their plan to crash the economy expecting the voters to blame the Dems for the resulting hard economic times. It is possible the voters are that dumb.
OTOH, USSC cases are forcing the adoption of new House district maps in several states that likely will help the Dems regain control of the House.
Before the election, that is now, all the Dems in that House need is about 5 moderate Repubs to join them to elect a bipartisan House Speaker to pass a budget to keep the Gov. going until the election. So, there is some hope that sanity will prevail.

The Fed's interest rate policy is not helping to save democracy in the current crisis. It is harming the economy and that will cause some foolish voters to vote for the Repuds to punish the Dems for what the MAGA Repuds clearly did.
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#15292510
Steve_American wrote:@Puffer Fish, this is Private debt, not US Gov. debt. They are totally different.

We saw this back around 2007 to 2009 during the GFC.

MMTers do say that private debt is a huge problem. The economist Steve Keen has been saying this at least since 2003 when he predicted the GFC.

The basic problem is wages are too low and profits are too high. So, the people borrow. And, banks foolishly lend to them. Unless they want the collateral.
.

Wages don't matter, only wages compared to inflation and price of goods. The problem now is inflation and price of goods have gone up, but wages haven't matched the increase.

If houses are more expensive, and food and a lot of others things are more expensive, and the wages of the masses aren't increasing at the same ratio or better, they are losing buying power and becoming less wealthy.
#15292516
Unthinking Majority wrote:Wages don't matter, only wages compared to inflation and price of goods. The problem now is inflation and price of goods have gone up, but wages haven't matched the increase.

If houses are more expensive, and food and a lot of others things are more expensive, and the wages of the masses aren't increasing at the same ratio or better, they are losing buying power and becoming less wealthy.


Thank you for agreeing with me that the main problem is that the economic rules have been changed since 1980 so that corps can keep making an ever increasing rate of profit, because they can keep wages low.
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#15292518
Steve_American wrote:Thank you for agreeing with me that the main problem is that the economic rules have been changed since 1980 so that corps can keep making an ever increasing rate of profit, because they can keep wages low.
.


I never said that, but I do agree that this is a part of an overall larger problem that was occurring for a long time before COVID. The car problem currently is about overall COVID inflation (possibly including some unspoken corporate collusion in keeping good prices high?), along with things like rising housing costs that is more about demographic/migration and government corporate corruption and incompetence, along with rising interest rates of course.
#15292519
Unthinking Majority wrote:Wages don't matter, only wages compared to inflation and price of goods.

No, what matters is real wages after taxes and land rent. I.e., real disposable wages.
If houses are more expensive, and food and a lot of others things are more expensive, and the wages of the masses aren't increasing at the same ratio or better, they are losing buying power and becoming less wealthy.

Soaring "house" prices are actually just capitalized land rent.
#15292521
Unthinking Majority wrote:I never said that, but I do agree that this is a part of an overall larger problem that was occurring for a long time before COVID. The car problem currently is about overall COVID inflation (possibly including some unspoken corporate collusion in keeping good prices high?), along with things like rising housing costs that is more about demographic/migration and government corporate corruption and incompetence, along with rising interest rates of course.


Sorry you failed to make your point more clear, and I got it wrong.
.
#15292646
Unthinking Majority wrote:I never said that, but I do agree that this is a part of an overall larger problem that was occurring for a long time before COVID. The car (sic) problem currently is about overall COVID inflation (possibly including some unspoken corporate collusion in keeping goods prices high?), along with things like rising housing costs that is more about demographic/migration and government corporate corruption and incompetence, along with rising interest rates of course.


AFAIK, the spending on covid added about1 percentage points to the inflations that occurred because of other things related to covid, starting with general disruptions to the economy, then supply chain problems, then oil price increases, then corps price gouging to make record profits, and then the Ukraine War. Etc.
#15292768
Unthinking Majority wrote:If houses are more expensive, and food and a lot of others things are more expensive, and the wages of the masses aren't increasing at the same ratio or better, they are losing buying power and becoming less wealthy.


Steve_American wrote:...the main problem is that the economic rules have been changed since 1980 so that corps can keep making an ever increasing rate of profit, because they can keep wages low.


Image
American workers are producing more than ever before, but they're not taking home the money. It is being skimmed at increasing rates by the non-productive parts of the workforce.

This parasitism by the financial elites has lead to many types of generalized misery.

And the result is the following:

USA government debt: $ 33 trillion
USA household debt: $ 17 trillion
Total debt: $ 50 trillion
Population of USA: 340 million

Government and Household debt owed per each and every USA citizen: $147,000

Image
These debt slaves owe a total of about a million dollars and they haven't even bought anything yet.

A big thanks to their parents for letting the powers-that-be destroy their own children's finances before they were even born.
#15292775
QatzelOk wrote:Image
American workers are producing more than ever before, but they're not taking home the money. It is being skimmed at increasing rates by the non-productive parts of the workforce.

This parasitism by the financial elites has lead to many types of generalized misery.

And the result is the following:

USA government debt: $ 33 trillion
USA household debt: $ 17 trillion
Total debt: $ 50 trillion
Population of USA: 340 million

Government and Household debt owed per each and every USA citizen: $147,000

Image
These debt slaves owe a total of about a million dollars and they haven't even bought anything yet.

A big thanks to their parents for letting the powers-that-be destroy their own children's finances before they were even born.


I'd like to say 2 things that I think about this post.

1] Only private debt is a problem, because normally it must be repaid out of income. OTOH, US Gov. debt will never be repaid out of income, that is out of revenue when the Gov. has a surplus. This is because the US has a chronic trade deficit and the rich save (i.e., do not spend or invest, they buy US bonds) a lot of dollars. These leakages of income would accumulate over just a few years into enough loss of income to cause a recession that ought to end the surplus. If it doesn't end the surplus, then the resulting additional such leakages will cause a deep depression.
. . . In the private sector the IRS treats debts that do not need to be repaid as income or gifts.
. . . So, because the US Gov. debt will never be repaid; it is not a debt. It is just so-called debt, It needs a new name. There are many who use the debt to call for spending cuts that only affect the poor or working class and they like the current name, so it will not be changed.
. . . A fact that supports this claim is that England, now known as the UK, has had a Gov. debt in every year since 1694, for 328 years. All the graphs of the UK's debt are not really of debt. They are of debt/GDP. This hides the fact that the total of all surpluses of England and the UK since 1694 is a tiny number compared to the current total debt. Therefore, it is possible for the US to not repay its debt for at least 200 years, like the UK has done or should I say, not done?

2] IMHO, the only part of the graph of real wages and real productivity over time that is fair to both workers and owners is the tiny bit from 1973 to 1978. What I'm saying is that the 2 lines should diverge, however they should both continue to increase. The exact way they should increase is open for debate, but the gap should widen.
. . . So, I'm saying that the 1st part is unfair to the owners because they invest dollars to increase productivity, but it looks like all the new income goes to the workers. If this appearance reflects the correct situation, then this is unfair. OTOH, keeping real wages flat for 50 years while the rich get insanely richer is also unfair. Fair is fair, and unfair is unfair, just saying. [Also, IMHO the CPI used for that graph was designed to be unfair to the wage earners, so the correct real wages have gone down over those 50 years.]
#15292807
Steve_American wrote:. . . So, because the US Gov. debt will never be repaid; it is not a debt. It is just so-called debt, It needs a new name.


Let's call the $33 trillion of USA government debt "unimportant sum of money that doesn't ever need to be paid back and whose interest will one day stop being paid as well."

Or we could call it "Marvin." The name doesn't change anything.

***

Question: How do you think America's creditors will deal with an economic depression that makes even interest-payments impossible?

You seem to be suggesting that the creditors, according to you, will simply give up on collecting the interest on their debt when the USA can no longer afford to keep up with it. Nice creditors like this, the world has never seen.

Isn't it more likely that these creditors simply kill off a large number of USA debtors and appropriate all their assets? Perhaps in a world war that is needed whenever debts get unpayable.
Aren't most modern wars simply killing fields of asset-holders that are staged in order to "top off" the banks with seized assets?

A lot of bankster-friends seem to be pining for a world war as we speak...
#15292863
QatzelOk wrote:Let's call the $33 trillion of USA government debt "unimportant sum of money that doesn't ever need to be paid back and whose interest will one day stop being paid as well."

Or we could call it "Marvin." The name doesn't change anything.

***

Question: How do you think America's creditors will deal with an economic depression that makes even interest-payments impossible?

You seem to be suggesting that the creditors, according to you, will simply give up on collecting the interest on their debt when the USA can no longer afford to keep up with it. Nice creditors like this, the world has never seen.

Isn't it more likely that these creditors simply kill off a large number of USA debtors and appropriate all their assets? Perhaps in a world war that is needed whenever debts get unpayable.
Aren't most modern wars simply killing fields of asset-holders that are staged in order to "top off" the banks with seized assets?

A lot of bankster-friends seem to be pining for a world war as we speak...


Nothing could be clearer, than the conclusion that you didn't understand the point I have made many times.

The US issues the dollar. The Fed is 100% a creature of the US Gov. It was created by a US law in 1913. It turns over (according to its own web page a couple of years ago) 97% of its revenue to the treasury, not its profits, its revenue. The US Pres. appoints the governors on its Board of Governers, incl. the Chairman.

Therefore, the US can always pay the interest. It can also always make the payments on the principal.

It may require the change in the laws that was made on Dec. 8,1941, that let the Gov. sell bonds directly to the Fed. Or, a change to let the Gov. not need to sell bonds at all, which is very like selling them to the Fed.

You are deep in the thrall of the household analogy. It is a false analogy.
However, if we change the Gov. into the husband and the Fed into his wife. Then the Husband has an infinite supply of blank bond forms that it can sell. OK, he sells one to his wife. She has a printing press, ink, and the special paper and is authorized by the 1913 law to print Federal Reserve Notes (aka dollars) and to print as many as she feels is necessary. Now, he has official dollars that he can use to pay the bill that is owed.

That is a better analogy. The older one was sort of true when the gold standard was in place before 1913. After 1913 when the Fed was created, it became less true. After WWII with the Brenton Woods agreement in place, it became even less true, but still a little true. After 1971, when Nixon totally ended gold payments on demand, it became not true at all, but economists kept using it for reasons. What the real reasons were (and still are) is open for debate.
. . . Everything else I said there are historical facts. E.g., in 1914 the Treasury had an infinite supply of bonds to sell and the Fed had an infinite supply of $100 bills to issue; and banks were authorized to create dollars when they made loans.
. . . However, AFAIK for some reason, economists continued to publish papers after 1913 that asserted that banks lent out their depositor's dollars, and kept the secret that banks create dollars with every loan. They were still keeping the secret until 2014. In 2014 an economist in Germany did an experiment that I have linked to 4 times on this site. He got a loan of 100K euros while his graduate students watched every worker in the bank to see exactly what they did. He published the results in a paper in 2014 that starts with the 3 current ideas of how banks make loans, and finally gets to the experiment. Then the Bank of England published a paper saying that it had been proven that banks create pounds when they make loans. Then, IIRC or understood the situation, the BoE published another paper that said that the experiment was flawed. Thus, keeping the secret going with plausible deniability.

[BTW -- I posted a thread on the Economics page of this site years ago about what I found on the official US Fed Res site. I found that in WWII on 12/8/1941 a law was passed to allow the Fed to buy US bonds from the Gov. directly. This was a secret.
. . . Many years before I had seen a claim that at the end of the war a little over half the War Bonds had been bought by the Fed. After the war it was still a secret, so the bonds could be sold in the secondary market; and so, they were then owned by corps or the people.]
#15292891
Steve_American wrote:Nothing could be clearer, than the conclusion that you didn't understand the point I have made many times.


Excellent. Some clarity about why owing 100,000 dollars in per capita government debt "doesn't matter."

The US issues the dollar. The Fed is 100% a creature of the US Gov. It was created by a US law in 1913. It turns over (according to its own web page a couple of years ago) 97% of its revenue to the treasury, not its profits, its revenue. The US Pres. appoints the governors on its Board of Governers, incl. the Chairman.

Therefore, the US can always pay the interest. It can also always make the payments on the principal.


This is quite the shell game of "who gave what money to whom." But it doesn't explain who the money is owed to, or why these creditors "don't care" if they ever get their money back.

Likewise, the idea that "the US can always pay the interest back" seems to suggest that there is a magic money tree somewhere in Tennessee that allows the American government to spend money and run up deficits forever without any consequences.

This type of magical thinking that you are promoting... is why the USA has gone bankrupt so many times, and had to genocide so many waves of First Nations to "top up their banks" with real estate deals that were leveraged through genocide (selling someone else's land because you can't budget properly).

This time, the First Nations have already been killed off and herded into reserves. So the Federal Reserve (and their family connections) might have to look at genociding some other people to "get back all the money they're owed by human animals."
#15292897
QatzelOk wrote:Excellent. Some clarity about why owing 100,000 dollars in per capita government debt "doesn't matter."



This is quite the shell game of "who gave what money to whom." But it doesn't explain who the money is owed to, or why these creditors "don't care" if they ever get their money back.

Likewise, the idea that "the US can always pay the interest back" seems to suggest that there is a magic money tree somewhere in Tennessee that allows the American government to spend money and run up deficits forever without any consequences.

This type of magical thinking that you are promoting... is why the USA has gone bankrupt so many times, and had to genocide so many waves of First Nations to "top up their banks" with real estate deals that were leveraged through genocide (selling someone else's land because you can't budget properly).

This time, the First Nations have already been killed off and herded into reserves. So the Federal Reserve (and their family connections) might have to look at genociding some other people to "get back all the money they're owed by human animals."


Lurkers, it is useless for me to reply to this reply.

He obviously didn't understand my proof. He asks about the creditors not caring after I explained where the Gov can get the money to pay them.

Yes, there is a sort of magic money tree. It isn't infinite, because if we use it too much and we'll get inflation. OTOH, the economic pain from high inflation is much less than the economic pain from default and bankruptcy. Also, default will hurt the rich because they or their corps own the bonds that we defaulted on if he's right. The rich may not like inflation, but they like it better than owning bonds worth zero dollars.
. . . Also, I didn't create the tree, Nixon did. And Pres. Taft did with the Fed. Res. Bank law of 1913.

The US Gov. has not gone bankrupt ever, so what is he talking about? The US has paid every bond off on time since 1788. With interest.
Last edited by Steve_American on 26 Oct 2023 15:42, edited 1 time in total.
#15292898
Steve_American wrote:He asks about the creditors not caring after I explained where the Gov can get the money to pay them.

Please tell me where the USA government is going to "get the money" to pay back its creditors again.

There was no "this institution will simply give the money the USA government needs to pay off its interest so it doesn't default" in your explanation...

...so I'm not sure if even YOU understand where this money is supposed to come from when each American must pay the interest on a $100,000 loan (per capita). If there's a depression, Americans will not individually be able to pay the interest.

Will "the creditors" force your nation into another world war to recoup "their" money? Wouldn't millions of asset-holders have to die to pay back all this money to "the creditors" whose name we dare not mention?
#15292902
QatzelOk wrote:Please tell me where the USA government is going to "get the money" to pay back its creditors again.

There was no "this institution will simply give the money the USA government needs to pay off its interest so it doesn't default" in your explanation...

...so I'm not sure if even YOU understand where this money is supposed to come from when each American must pay the interest on a $100,000 loan (per capita). If there's a depression, Americans will not individually be able to pay the interest.

Will "the creditors" force your nation into another world war to recoup "their" money? Wouldn't millions of asset-holders have to die to pay back all this money to "the creditors" whose name we dare not mention?


Do you care that since 1694 England has had a national debt at the end of every year? In most of those years it was on the gold standard. It became the UK. It lost its Empire. And it never missed an interest or principal payment. If a nation like England/UK can have a debt for 329 years why can't the US do the same?

Lurkers, I don't know about you but I've never received a bill for interest on the national debt. My taxes were never increased to pay the debt. Since about 1990, when Bush I raised taxes my taxes have not been raised, and in fact have been cut by Bush II and Trump. Where is the evidence that I have suffered as a result of the national debt?

This poster just refuses to open his mind to understand the truth. He didn't assert that I'm wrong about any element of my proof except the conclusion. And he didn't say why I'm wrong.
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