A font of information:
Consumer debt has doubled since 1990, to $7.5 trillion—more than $50,000 per household, over $25,000 for every man, woman and child in America. Much of this has involved homeowners taking out home equity loans to finance consumption, pay other debts, or gamble in the stock market. In 1982 homeowners owed lenders 30 percent of the market value of their residences. By 1999 this figure was up to 46 percent.
During the 1990s, the ratio of household debt, including mortgages, to disposable income rose by almost 25 percent. The average American family now has debts that exceed its average after-tax income. This debt is unequally distributed—in a manner diametrically opposite the distribution of wealth. The top ten percent of the population own over 70 percent of the national wealth, while the bottom 90 percent of the population, with less than 30 percent of the wealth, owe 70 percent of the consumer debt.
In corporate America as well, the 1990s has been an era of growing debt—topping $10.6 trillion by the end of 1999. By and large, companies have been unwilling or unable to finance expansion and new investment by issuing new stock, for fear that this would dilute the holdings of shareholders and cause a decline in the price. Rather, corporations have gone into debt, even borrowing money on the financial markets to buy up their own stock and boost its price.
The result is that instead of the traditional trade-off of equity and debt, with debt decreasing during a boom and swelling during a downturn, most companies have seen their debts increase during the stock market boom. The present financial crisis, let alone any severe and prolonged recession, will mean corporate bankruptcies on a vast scale—with predictable effects on jobs, benefits, pensions and living standards generally.
Note that the numbers have not been updated to include today's losses.
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