Category Archives: Debt

The 'Democratization Of Credit': Is It Over?

Affirmative Action, Business, Debt, Democracy, Federal Reserve Bank

WSJ: “The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.”

[This is not what that ignoramus Michael Moore claims. The sad thing about the man’s propaganda is that nobody among the so-called conservative MSM can refute it with reference to First Principles.]

“But the financial crisis and recession have reversed … the ‘democratization of credit,’ forcing a tough adjustment on both low-income families and the businesses that serve them.”

‘We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans,’ says Ronald Mann, a Columbia University law professor. Now, ‘it will be harder for families at the bottom of the income ladder to get credit cards,’ he says.

The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.”

[SNIP]

The following aside is beside the point, but my guess is that if a multiple regression analysis were conducted, IQ would be the underlying variable that would stubbornly crop up to account for this alarming, yet ostensibly unintuitive, ratio of debt to income in low-income individuals.

IN ANY CASE, do you agree that the democratization of credit is on the wane? I find that a dubious statement. The latest legislation described has not eliminated the imperative to lend to risky entities and individuals, so much as it has created, as ever, unintended consequences. These contingencies have, so far, caused banks to twist like pretzels in order to find legal ways around eliminating risky borrowers.

The ‘Democratization Of Credit’: Is It Over?

Affirmative Action, Business, Debt, Democracy, Economy, Federal Reserve Bank

WSJ: “The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.”

[This is not what that ignoramus Michael Moore claims. The sad thing about the man’s propaganda is that nobody among the so-called conservative MSM can refute it with reference to First Principles.]

“But the financial crisis and recession have reversed … the ‘democratization of credit,’ forcing a tough adjustment on both low-income families and the businesses that serve them.”

‘We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans,’ says Ronald Mann, a Columbia University law professor. Now, ‘it will be harder for families at the bottom of the income ladder to get credit cards,’ he says.

The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.”

[SNIP]

The following aside is beside the point, but my guess is that if a multiple regression analysis were conducted, IQ would be the underlying variable that would stubbornly crop up to account for this alarming, yet ostensibly unintuitive, ratio of debt to income in low-income individuals.

IN ANY CASE, do you agree that the democratization of credit is on the wane? I find that a dubious statement. The latest legislation described has not eliminated the imperative to lend to risky entities and individuals, so much as it has created, as ever, unintended consequences. These contingencies have, so far, caused banks to twist like pretzels in order to find legal ways around eliminating risky borrowers.

Updated: The Dollar Dethroned

China, Debt, Economy, Federal Reserve Bank, Political Economy

As has been lamented on this space time and again, the trashing of the dollar by the Bush/Barack soul mates has resulted in the currency’s demise as “the bedrock of world trade.”

It’s a slow and sad demise: “The latest sign of the ground shifting beneath our feet is [the report by the Independent today] of plans by Gulf states, China, Russia, France and Japan to end their practice of conducting oil deals in US dollars, switching instead to a diverse basket of currencies.”

“It is not hard to see the motivation for oil exporters to move away from the dollar. The value of the US currency has fallen sharply since last year’s meltdown. And fears are growing, in the light of a spiralling US government deficit, that a further depreciation is likely. They do not want to sell their wares in return for a currency with an uncertain future.”

“It is also easy to see why China would like a world trading system that is underpinned by other currencies as well as the dollar. For the past decade Beijing has been recycling the proceeds of its giant national trade surplus into purchases of US government bonds and other dollar-denominated assets. China too stands to make a significant loss if the value of the dollar falls. For China, however, the timing is much more sensitive. Beijing needs to reduce its dollar holdings, but if it does so too quickly it will bring about the very devaluation it fears. This explains why Chinese officials appear to want this transition to take place gradually over the next decade.”

[SNIP]

The usual tele-Demopublicans will depict this economic impetus as an act of political treachery. But what else can these nations do? Fall on their proverbial swords for the US?

Update (Oct. 7): “Stop printing money,” “We don’t care what you think,” and “You’re a moron”: This is a sweet sample of the heckling that greeted Rep. Steve Israel (D-Huntington), during a healthscare townhall meeting. It’s always encouraging when protesters associate a massive new government program with the debt (dah!), the demise of the dollar, and ultimate economic ruin. I know; this seems obvious to readers on this space, but signs that such basic comprehension is spreading are to be celebrated.

‘The Recovery That Isn’t’

Debt, Economy, Free Markets, Inflation, Labor

As you go over the alarming new unemployment numbers, remember what was said in this space with respect to that “unbeatable bit of political fraud; that fig leaf of a ‘jobless recovery’: “A jobless economic recovery is the equivalent of a housewarming for the homeless.”

It was revealed today that “employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics’ most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.”

More from Peter Schiff: “Those who do cling to the absurd belief that, absent exponential productivity gains, the economy can expand while workers are being laid off will undergo a massive test of their convictions now that it’s clear the employment picture is bleak. Today’s weaker-than-expected report on non-farm payrolls revealed that employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics’ most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.”

“Taken together with yesterday’s larger-than-expected pickup in unemployment claims (first time claims rose by 17,000 to 551,000), today’s report makes it certain that the job market is still contracting, even while some indicators like GDP and consumer confidence are moving in the opposite direction.”

“There is no question that the sense of panic has temporarily subsided. In recent interviews, Treasury Secretary Geithner has been almost giddy in his descriptions of the recovery – all the while crediting his own policies for averting disaster. Americans are once again taking the government’s bait by spending money they don’t have to buy things they can’t afford. Evidence of this trend was contained in data released earlier this week which showed that even while income growth was largely stagnant, U.S. consumers showed the biggest month-over-month increase in personal spending in ten years! With the same report showing a 25% drop in the savings rate, the source of the spending money is clear. But depleting savings and increasing borrowing does not a recovery make.”

“To really recuperate, the government must allow market forces to restructure our economy. The government and individuals must rein in their spending; we must replenish our stock of savings, allow interest rates to rise, asset prices to adjust to economic reality, insolvent businesses to fail, and wages to reflect productivity. To accomplish these goals, subsidies that distort market forces must be removed and regulations that undermine our competitiveness must be repealed.”