Courtesy of Mish.
Consumers Not Ready to Borrow Again
Ben Bernanke is trying like mad to stimulate credit and lending but to no avail. It’s an uphill debt because of demographics, student debt, and lack of jobs.
Citing falling debt-service needs, some economists think consumers may be ready to go on a borrowing. They are badly mistaken.
I agree with Jed Graham on Investor’s Business Daily who says falling debt-service needs is an illusion. Graham makes the case in Consumer Credit Impaired By Under-45 Job, Debt Woes.
Nearly four years after a borrowing binge gave way to financial crisis, have households slashed enough debt to take on new credit and start spending again?
Yes, says a growing chorus of economists, with some evidence to back them up. The Federal Reserve’s ratio of debt service payments to disposable income is at its lowest level since 1994.
But that traditional measure is a poor guide today, as credit-hungry adults under 45 bear the brunt of the jobs, housing and student loan crises.
Considering where more of the income is coming from (government supports), who’s earning a bigger share of wages (baby boomers) and which type of debt has been on the rise (student loans), re-leveraging may be a long way off.
Not Ready to Borrow
Graham’s analysis is correct. Here are some points from the article that will explain why.
Demographics
- The number of full-time workers younger than 45 has fallen by 9 million, or more than one in seven, Labor Department data show.
- The number of full-time workers ages 55 and older has climbed by 8.5 million.
- The 35-44 population has shrunk by 4.5 million over the past 12 years.
- The huge baby boomer cohort has aged while Generation X is unusually small.
…
