Debt | timiacono.com

Generation “X” = Generation “Debt”

You’ve got to study the methodology a bit and pay careful attention to the legend in the chart below from this study by the St. Louis Federal Reserve on household debt, but, after you do, you quickly realize that Generation “X” (those born between 1965 and 1980) is having an increasingly hard slog now that the best part of the U.S. credit expansion is decades behind us and about all the U.S. economy has left now is the hope for more asset bubbles that they might somehow get on the right side of.

It looks like the Baby Boomers (I’m very late in that generation) aren’t doing much better than the Gen Xers and there’s surprisingly high debt for previous generations as indicated by the open circle, open square, and open triangle symbols above. All in all, not good.

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Those Pesky Student Loan Balances

The graphic below from this story at Vox serves as a timely reminder that, while much of the rest of the U.S. credit market continues to improve after a multi-year bout of deleveraging, student loans are an ongoing problem for many Americans, both young and old.

There are more and more reports of senior citizens having trouble paying back student loans (mostly as co-signers) and, lately, of social security checks being garnished when these co-borrowers fall behind.

The other charts in the Vox story are even more interesting than the one above, particularly the last one that really doesn’t paint for-profit higher education in a positive light.

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Private Sector Debt Still Unmanageable

Rex Nutting states the obvious (well, at least to anyone who isn’t an economist and who doesn’t work for the Federal Reserve) about private sector debt in this item at Marketwatch:

For the past six or seven years, most of what the Federal Reserve has done to fix the problem has been focused on getting the credit spigot turned back on: cutting interest rates and hectoring banks to start lending again, even though demand for loans was weak.

It’s a surreal policy because, while the proximate cause of the Great Recession was the collapse of borrowing in 2007-2008, the ultimate cause was the growth of unsustainable debt over many years, culminating in a doubling of debt between 2000 and 2007.

It’s nice to see that “unsustainable debt” as the root cause of our recent woes is an idea that is catching on and, it seems likely that, after another few years or so of tepid consumer spending, we’ll at least begin to rethink the whole idea of indebted American consumers as the primary engine of economic growth.

The Housing Market’s Lost Generation

There’s lots of compelling data in this Wall Street Journal story ($) about how millennials are getting off to a difficult start in life, asset accumulation-wise, due to a number of factors, most of which their baby-boomer overlords in government and banking seem to like just fine, yesterday’s student debt relief effort by the Obama Administration notwithstanding.

As it relates to housing, twenty-somethings have been notable no-shows in the recent housing boom for reasons that should be clear in the two graphics below.

Also see this CNBC report on a recent Wells Fargo survey that showed millennials being overwhelmed by debt as never before. It’s not unusual to spend your 20s treading water financially as you cope with finding your place in the world, but today’s younger set certainly seems to have the deck stacked against them.

Just wait til they find out in a couple decades that their baby boomer parents have had to spend their inheritance to make ends meet in their golden years.

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