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To: TobagoJack who wrote (96835)	4/20/2001 11:57:03 AM
From: Mark Adams	Read Replies (1) \| Respond to of 436258

Jay- good insight re the interest rate and effect on debt burden. I would comment that much of the consumer debt is fixed rate, meaning a rise or drop in rates has a muted impact on debt service cost at the consumer level. In a period of declining rates, as we are now, I don't see the debt burden as unusually high, nor a probable key factor in a new depression.

To: TobagoJack who wrote (96835)	4/20/2001 11:58:35 AM
From: Mike M2	Read Replies (1) \| Respond to of 436258

Jay, it is worth noting that auto leases are not included in the consumer debt figures. It may not seem like debt to some but see how long you keep that SUV without making the payments -g- unless you park it at you neighbors and park far from work. Chugs Mike

To: TobagoJack who wrote (96835)	4/20/2001 12:11:50 PM
From: GraceZ	Read Replies (2) \| Respond to of 436258

Jay- Appreciate your perspective enormously. The one thing that complicates matters when talking about household debt is that some prefer to talk about it in terms of cash flow (ability to service debt) and others prefer to talk about it in terms of debt to assets or net worth. I've been in the position of trying to help friends and clients trying to get their financial houses in order so I've had to explain these two approaches extensively. Some people are highly cash flow oriented, they only think in terms of whether or not the debt can be serviced in terms of the income they receive and others want nothing of that approach, they want to know that their net worth is rising while their debt levels are shrinking proportionately. I'm decidedly in the net worth camp, as I'm sure most on this thread are. Unfortunately most Americans are cash flow oriented, if they can make the payments they don't care if their net worth is stagnant or declining. Mostly they don't know that this is happening because they don't do net worth statements over time and compare their situation year to year the way a business would. They just got rewarded for this approach with these rate cuts because it will make their debt more serviceable. Unfortunately these are the same people who if they don't take this opportunity to get religion are going to be totally screwed if inflation picks back up and the FED finds itself in the position of having to raise rates again. Truth is when you take on debt you are counting on future flows and incomes that may or may not be there. In a worse case scenario you can sell off assets to pay down debt if things run against you. This only works if your assets are actually higher than your debt. After seeing the market implode over the last year we all know what happens to asset prices when everyone decides to do this at once.

To: TobagoJack who wrote (96835)	4/20/2001 12:21:54 PM
From: Ilaine	Read Replies (2) \| Respond to of 436258

Hi Jay, thanks, I did not realize that mortgages in Japan are multigenerational. That gives an interesting insight into the Japanese economy. I posted yesterday after reading most of the Federal Reserve's Surveys of Consumer Finance that, while I find this counterintuitive, in the US household debt levels rise during periods of economic expansion and savings rates rise during periods of economic contraction - so actually rising debt levels and declining savings have been bullish signs historically - over the past few decades, anyway. federalreserve.gov The plummet in nonfinancial commercial paper outstandings tells me that businesses are not borrowing money - whether it's because they can't or because they don't want to, I don't know. federalreserve.gov I also posted an anecdote, that a loan officer from First Union was going door to door to local businesses handing out fliers offering to make business loans, so that suggests that businesses are not borrowing because they don't want to. Belt-tightening means fear of slowdowns ahead. Anecdotally I can tell you that business lawyers around here say no deals are being made. The bankruptcy lawyers are swamped. I am getting calls on a daily basis by people who were fired and want to sue. If times were good they'd just get another job and forget about it. But my crystal ball is hazy and I can't see the future.:)