To: pater tenebrarum who wrote (107732 ) 6/8/2001 4:14:01 PM From: Mark Adams Read Replies (1) | Respond to In this note to a friend, I document yet again that the %HomeEquity number also has reasonable explanation. That leaves the higher credit card outstanding balance, of which we don't have firm numbers on the amount rolled over vs payed monthly. The reward programs various cards have extended surely encourages substitution of credit for cash.The austrians would say that an artificially low cost of capital encourages malinvestment and capital expansion beyond what would be appropriate under 'normal' circumstances. Such excess capacity then leads into exagerated boom-bust cycles. { DAK- This was refuted by the data in the Fed Study- oops, that was the negative savings rate that was refuted, not the debt burden distribution. } It's also clear that business has levered up, using debt to finance capacity and buy back stock. I take issue with the %home equity numbers as I believe the recent boom has increased affordability, resulting in many new home owners with little or no equity, skewing the average downward. Also, tax law changes remove incentive for older individuals with large amounts of equity to remain in a house mismatched with their needs- they can tap that equity and move into more appropriate housing, possibly putting some of the withdrawn equity into CD's etc.
