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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: pater tenebrarum who wrote (58962)1/18/2001 7:54:27 AM
From: Oblomov  Read Replies (1) of 436258
 
Heinz, the fact that HH debt is 108% of disposable income means nothing per se. There is nothing special about the value of 100% in this case. Debt is a component of net worth, and so debt is properly compared to assets. The debt/asset ratio has not changed much in the past 20 years. And certainly the ability to repay is based not on income but on the HH's entire financial resources.

Although equity values declined by about 10% overall last year, the average US HH does not have significant assets in the equity markets (<$50K). In fact, the median HH has less than 3K in the equity markets. The vast majority of HH asset values is contained in real estate.

I, too, believe that deflation is the next phase of the credit cycle. In fact, we are probably already in it. Any attempt to reflate appears to stimulate asset prices rather than goods prices. If real estate prices are hit, then debt deflation is assured. But, not until then, IMO.
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