Comments on: Can We Have a Recovery When People Have So Much Debt?

By: Bank account

Bank account — Mon, 07 Sep 2009 02:53:10 +0000

I totally agree. Recovery seems impossible if if we do not pay our debt and bailouts will not solve the credit crunch in the long term.

Another point that we can contribute to the recovery of our economy is to spend more. Yes that is true.

Why? every time we tighten our belts to save more and spend less, we only make the credit crunch more intense. We forgot the most important fuel of our economy – consumption. Without it our economy will eventually collapsed. I am not saying we should spend all our money, but the point is, we should be responsible enough to establish a balance among paying our debt, saving money and spending.

By: retireby35

retireby35 — Wed, 24 Jun 2009 17:47:33 +0000

I don't see a recovery in the near horizon. But then this recession is just nature's way of letting us know we completely screwed up.

When consumers spend way beyond their capabilities and businesses make foolish loans/stupid investments, the pendulum eventually needs to swing all the way to the other side. So for a while consumers will be stingy and businesses will be cautious. This is probably a good thing in the long run.

By: MoneyFunk

MoneyFunk — Fri, 12 Jun 2009 15:35:28 +0000

If I actually get out of $80K of debt, then anyone can do it! Just time, sacrifices, and patience. Oh ya, and wanting it to happen badly enough.

By: Kirk Kinder

Kirk Kinder — Fri, 12 Jun 2009 02:22:01 +0000

To Steve – it doesn't matter if there is more good debt than bad debt when the total debt becomes unmanageable. Economies grow through savings and investment. Wealth is not created by debt because eventually the debt must be repaid whereas savings and investment leads to technological innovation and entrepreneurial creation.

If you look at the US since the mid-1990s, the growth in debt has corresponded almost exactly with the drop in savings. While we may see a short term cyclical recovery, the economy will struggle as we reduce our debt. The scary thing is there has never been a deleveraging in an economy that wasn't dramatic. A slow repayment of debt is probably out of the question if history repeats. We will probably see a liquidation of debt – meaning asset deflation.

Of course, the Fed may be able to engineer a different result. But, I think to what Einstein once said – never expect someone who caused a problem to fix it.

By: Stacey

Stacey — Fri, 12 Jun 2009 02:17:44 +0000

I long for cd rates of 6-8%. Perhaps then "old-fashioned" savings sense will catch fire. It's a lot more fun saving when you know you're going to double your money in 9-12 years vs. 36!

BTW, did you catch the MW headline about 30-yr mortgage rates increasing again? Time to redo your "change in monthly pmt" table…

http://www.marketwatch.com/story/mortgage-rates-t…

By: LOL

LOL — Thu, 11 Jun 2009 23:53:11 +0000

My personal opinion is that recessions are not bad. The next recovery should not begin until the stupidity has been cleansed and resources are reallocated to better utilized places.

I vote that (US) resources be reallocated to building wind generators and nuclear power plants and electric cars or we will be forever indebted to the oil producing nations.

And BTW, ethanol was a retarded idea — whichever economist that thought running our cars on our food should be "reallocated" to a place where he can do less damage.

By: Steve

Steve — Thu, 11 Jun 2009 20:45:26 +0000

When they say debt is 130% of disposable income on average, are they including mortgages, student loans, car loans, and debt for investment? (The kinds of things we would generally call "good debt"?) That can't possibly just be credit cards and consumer debt can it?

By: Ben

Ben — Thu, 11 Jun 2009 20:10:17 +0000

It makes sense that the "experts" want a consumer led recover because they want a recovery. As usually, it is wallstreet looking for fortune and glory at the expense of the average consumer.

By: Lord

Lord — Thu, 11 Jun 2009 19:14:27 +0000

Sure. Debt doesn't appear overnight and won't disappear overnight either but that doesn't mean a recovery can't happen, only that it will be more anemic than usual and a good portion of debt will be defaulted away as well as paid down over time.

By: Esko Kiuru

Esko Kiuru — Thu, 11 Jun 2009 17:58:10 +0000

JLP,

That's a valid argument. Our economy is very dependent on consumer spending and when they don't have money to spend things don't look too good. It's likely that the coming recovery is going to be gradual and long. It's going to be a while before the fundamentals are in sync again.