Lyle Cosmopolite - Comments

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14 Signs That Most Americans Are Flat Broke And Totally Unprepared For The Coming Economic Crisis
7 years ago

At yearend 2015, the total debt of USA households was 13.7 trillion. This amount includes a small but unknown amount of bank loans to nonprofits. The population of the USA is about 320M. Hence Americans owe an average of about $43000 apiece. Two thirds of this amount consists of home mortgages. One quarter consists of consumer credit and student loans. In order for #11 to be correct, the average USA household has to have 5 members, which is implausibly large.

I am sceptical of the survey evidence that grounds most or all of this article.

If there is a major economic crisis in the USA, a revolt at the ballot box will limit the ability of creditors to come down hard on the houshold sector. It is financial firms that will be hit hardest.

The following data offsets the above liabilities. The Fed values American owner-occupied homes at 22 trillion. American households and nonprofits own 10.8 trillion of deposits, 4.5 trillion of debt instruments, 14 trillion in stock, and 6.6 trillion in mutual funds. The Fed estimates the net worth of unincorporated firms at 10.7 trillion, a figure includes farms and most commercial real estate.

www.federalreserve.gov/.../z1r-5.pdf

Unsound Banking: Why Most Of The World's Banks Are Headed For Collapse
9 years ago

The threat hanging over fractional reserve banking is not deflation but inflation. Commercial banking is a vast cloud castle in the sky. As faith erodes in the ability of banks to honour their commitments to their depositors, funds are withdrawn and used to purchase bullion, real estate, durable goods, and equities. Inflation and interest rates soar. The Fed has kept inflation at bay by paying interest on reserves at the rate of 25 basis points per annum, at a time when the interest rate on T Bills is around 10 basis points per annum. I do not know how long this game can continue. But should inflation ignite, the willingness of banks to hold several trillion of excess reserves (since 2009 reserves have exceeded total demand deposits) will crumble, there will be a rush for the exits, and an inflationary firestorm will be underway. The Fed says that it has planned for such a contingency. I have no idea whether its plans will prove feasible in a time of crisis.

14 Signs That Most Americans Are Flat Broke And Totally Unprepared For The Coming Economic Crisis
9 years ago

The stock market will crash for the third time this century, and that will usher in some sort of nontrivial recession. After that crash, it will resume rising. The real problem is that we are on the brink of World War III, either in the Middle East, or in Eastern Europe.

14 Signs That Most Americans Are Flat Broke And Totally Unprepared For The Coming Economic Crisis
9 years ago

#1 "...24% of all Americans have more credit card debt than emergency savings."

This makes bankruptcy easier.

#2 "...13 percent of all Americans do not have any credit card debt, but they do not have a single penny of emergency savings either."

That is the operational meaning of living from paycheck to paycheck.

#3 "...62% of all Americans are living paycheck to paycheck."

How defined?

#4 "Adults under the age of 35 in the United States currently have a savings rate of negative 2%."

This is quite normal. And was saving defined to include paying off a mortgage and student loans?

#5 "More than half of all students in U.S. public schools come from families that are poor enough to qualify for school lunch subsidies."

I will take this more seriously when I see data on a high and rising %age of upper middle class families sending their kids to private schools.

#6 "...more than one out of every three adults in the United States has an unpaid debt that is “in collections“.

I rather doubt that it is as high as 33%.

#7 "...52% of all Americans really cannot even financially afford the homes that they are living in right now."

'Afford the home they are living" is defined how? The problem is building restrictions in the northeast and Pacific states, and easy mortgage money. Both pump up house prices.

#8 "...40% of Americans could not come up with $2000 right now without borrowing it."

Unsophisticated have always borrowed from older relatives. That 40% figure may have been always true.

#9 60% of Americans could not say yes to the following question…“Do you have 3 months emergency funds to cover expenses in case of sickness, job loss, economic downturn?”

I first heard this around 1980. I fear it is sadly true, although last century, the figure was often not as high as 60%.

#10 "...less than one out of every four Americans has enough money stored away to cover six months of expenses."

Around 1980, I read that every family's goal is to have liquid funds covering 18 months' minimalist expense, after unemployment benefits. I have always lived by that. But then I drove old cars into the ground, and wear clothes 10-20 years.

#11 "Today, the average American household is carrying a grand total of 203,163 dollars of debt."

That is too high, especially if you removed mortgage debt, which is backed by an asset: the house.

#12 "It is estimated that less than 10% of the entire U.S. population owns any gold or silver for investment purposes.

It may be less than 5%. I do not agree that gold and silver will be of much value in a true crisis.

#13 "48% of all Americans do not have any emergency supplies in their homes whatsoever."

How are 'emergency supplies' defined?

#14 "53% of all Americans do not even have a minimum three day supply of nonperishable food and water in their homes."

Most Americans could live for 10-15 days out of nonperishable food in their houses. Few of us store potable water. I collect rain water.

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