debt to disposable income hasn't increased 'slightly'. it has exploded to an all time high of close to 110% for households. similar to the other debt measures, it's a quite exponential looking curve.
Ah- I made an error saying debt to disposable income when I meant interest burden to disposable income. Still, when you account for the fact that capital gains tax depresses disposable income, in addition to those who converted all or part of their IRA to a roth in 98 or since, incurring even more tax, you can see how it's possible that debt hasn't changed much at all, but disposable income has. I can look at the BLS data to confirm or deny this theory. I do remember that the portion of taxes to disposable income did show a blip upwards.
Message 15543838
[edit] I've looked at the tables, and while the tax bite has increased, disposable income outpaced the increased tax burden. So taxes taking a larger bite decreasing disposable income would not account for an increase in debt to disposable income ratio.
It's interesting that you mention contrary investor, as I follow them avidly since mid last year. It is their data that I try to disprove or find fault in, along with prudent bear. I'm less than successful, but I've already satisfied myself that at alternative explanations exist for at least two of their arguments- the negative savings rate and decline in home equity.
Your suggestion that a virtuous cycle may degenerate into a vicious cycle has merit. I look to the corporate world, where pension plan gains accounted for a substantial portion of income recently to demonstrate this quite well. CRS, I think on their last conference call, suggested that income could be impacted to the tune of 40% due to market conditions. I don't think the average individual will be impacted by equity related losses to the extent some suggest- unless the layoff cycle accelerates, which is possible IMO.
I appreciate your doom and gloom- I seek it out. I want to understand both the positive and negative arguments so that I can make better informed choices. |
