Nowhere is that more evident than for American consumers, who have long been net lenders to the rest of the US economy. US Department of Commerce data show that in 2001 US households received some $1,091 billion in interest income, well in excess of the $592 billion they paid in interest expenses. In other words, household sector lenders have nearly twice the exposure as borrowers to the vicissitudes of the interest rate cycle. While low interest rates may help debtors, those dependent on interest income — especially aging workers and retirees — are hurt. For older baby-boomers (ages 55-64), my colleague John Scowcroft calculates that the median family currently has a negative net worth to the tune of $173,000; for the 9.6 million families in this cohort, that amounts to an aggregate shortfall of $1.7 trillion. Consequently, a post-bubble markdown of asset yields would only compound an already difficult asset-liability mismatch for this key segment of the US population.
Just take this paragraph and try to balance one set of statements with the other. If this is true:
US Department of Commerce data show that in 2001 US households received some $1,091 billion in interest income, well in excess of the $592 billion they paid in interest expenses.
How can this be true:
For older baby-boomers (ages 55-64), my colleague John Scowcroft calculates that the median family currently has a negative net worth to the tune of $173,000
Who is it that he thinks gets all that interest income and if they have negative net worth how come they aren't paying interest on it?
If someone presented a case to me where someone had a negative net worth of $173,000 I would assume one of two things. Either they were a recent graduate of medical or law school or they were a high salaried individual living way beyond their means. This hardly describes most 55-64 year olds let alone half of them. It's a ridiculous statement. |
