Matt Weidner – Fighting For The American People

The following is a mind-blowing excerpt from today’s Wall Street Journal entitled, “Household Debt Can Hasten Recovery, When It Goes Unpaid”  the full text of the article can be found here http://online.wsj.com/article/SB125651175580806989.html

The Federal Reserve puts US household debt, including mortgage debt, at about $137 trillion or 125% of annual aftertax income.  Experts believe this number will reduce to a more sustainable level of 100% over the next several years as consumers “deleverage” or just stop paying those debt obligations.  Some economists argue that such deleveraging is actually good for the larger economy…because it forces those holding the debt to write off the bad debts, and lets the consumer get right back out there spending and borrowing.  Yipee!

First American Core Logic, which tracks the performance of home loans estimates that 9.3% of the nationsl 52.4 million mortgages are 60 or more days bebind, a figure that represents $1.2 trillion in loans.  By this logic, this high default number isn’t all that bad because when consumers walk away from this debt, the lenders will be forced to absorb the losses, then consumer lending and spending will start back up and we’ll all be in great financial shape in no time.

But wait, a larger problem facing the entire country is the fact that by current estimates, US government debt could reach 85% of annual economic output by 2014, up from about 58% now. 

HOLY SMOKES, just let that sink in for a minute…..US debt at 85% of annual output!

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