{"id":4450,"date":"2011-06-27T07:32:59","date_gmt":"2011-06-27T13:32:59","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=4450"},"modified":"2018-09-21T02:05:49","modified_gmt":"2018-09-21T06:05:49","slug":"debt-wave-still-growing","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/06\/27\/debt-wave-still-growing\/","title":{"rendered":"Debt Wave Still Growing"},"content":{"rendered":"

For almost three years now I have been highlighting the dangers of an entire world that consumes more than it creates; read: uses debt to extend its means.\u00a0 Most recently I talked about this issue on 31 May, 2011 in my post entitled, “Top 5 Problems Facing the Economy: Chronic Fat, That is Spending Beyond Our Means<\/a>.”<\/span><\/p>\n

The problem is that if the world kept its accounts honestly then those that borrow money would do so by finding a willing lender.\u00a0 That is, those with a surfeit of resources find those with an excess of resources to lend to them.\u00a0 The interest on those debts would be paid by profits (i.e. real economic growth) earned by having invested that debt in something that earned a return.<\/span><\/p>\n

In terms of personal finance, people would borrow money to buy something useful, like a car that could get them to and from work.\u00a0 With a car, more jobs are available to the job seeker just because it expands the geographic radius of where a job could be had.\u00a0 In part, the additional money earned by this job – that couldn’t have been earned otherwise – goes to pay off the debt financing for the car.\u00a0 This is debt that makes sense economically.<\/span><\/p>\n

Unfortunately, the debt wave that is still growing across the world is not being financed by those with excess resources.\u00a0 No, instead what is happening is that those living in the present are borrowing from those living in the future.\u00a0 The financing of debt has largely been carried out by governments printing money.<\/span><\/p>\n

This process of printing money has been going on since the dot.com bubble burst back in 2000.\u00a0 When the value of the stock market started declining, followed by September 11, 2001, the U.S. Federal Reserve pumped the U.S. economy full of money.\u00a0 They did this by cutting interest rates dramatically.\u00a0 But now a full decade on and the interest rates have never really gone back up.\u00a0 Essentially the world’s economy has been flooded repeatedly with cheap, almost free, money.<\/span><\/p>\n

The massive, worldwide real estate bubble was largely created by this process.\u00a0 But the real estate bubble wasn’t the only abuse of credit – consumers levered themselves to crazy levels of debt.\u00a0 They bought houses when they shouldn’t have.\u00a0 They bought second houses when a first house already taxed their monthly incomes.\u00a0 They bought cars when they shouldn’t have.\u00a0 They bought cars more expensive than their means could justify.\u00a0 They took out home equity loans to finance new home projects so that their kitchens could sit unused like before, but look better doing so.\u00a0 They used credit cards to buy stuff they didn’t need.<\/span><\/p>\n

Importantly, this took place all over the world, not just in the United States.\u00a0 But why bring this subject up again?\u00a0 Because, while it may be a tired refrain on the blog, it is not a subject talked about publicly very often.\u00a0 Yet, this morning’s Wall Street Journal is thankfully talking about this at last.\u00a0 In a piece entitled, “Debt Hamstrings Recovery,” they state:<\/span><\/p>\n

“Around the globe, the inability of governments and households to reduce their debt continues to cast a shadow\u00a0 over Western economies and the financial health of individuals.\u00a0 Today, U.S. consumers have more mortgage and credit-card debt than they did five years ago, and the U.S. budget deficit is worsening.\u00a0 At the same time, European governments are having to throw billions more euros at Greece to keep it afloat.<\/span><\/p>\n

“The repercussions are likely to play out for years to come in the form of patchy economic growth, further government market intervention – such as last week’s decision by oil-consuming nations to release more oil onto the markets – and frequent financial-market swings.<\/span><\/p>\n

“The fundamental problem is that reversing the trend of piling on the debt requires some combination of cutting spending, growing income or the economy, and inflation.\u00a0 But wage growth is stagnant and home prices, which underpin much of the debt problem, are still falling.<\/span><\/p>\n

“Meanwhile, in a vicious circle, businesses aren’t hiring or investing because they know consumers are tapped out.\u00a0 Banks, for their part, are hoarding cash, being stingy with new loans.”<\/span><\/p>\n

I could go on.\u00a0 I guess my point is that the real issues underlying the economic crisis are finally being talked about<\/a>.\u00a0 All of the dots are being connected by those with a large public voice.\u00a0 This is disappointingly slow, but it is encouraging.<\/span><\/p>\n

My personal definition of wisdom, shared in “The Intuitive Investor: A Radical Guide for Manifesting Wealth<\/a>” is the degree to which you are in accord with reality.\u00a0 Put another way, the degree to which you are not delusional.\u00a0 Right now, the economy and decision makers are finally getting wise.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

For almost three years now I have been highlighting the dangers of an entire world that consumes more than it creates; read: uses debt to extend its means.\u00a0 Most recently I talked about this issue on 31 May, 2011 in my post entitled, “Top 5 Problems Facing the Economy: Chronic Fat, That is Spending Beyond […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-4450","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4450","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=4450"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4450\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=4450"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=4450"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=4450"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}