Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (61465)	6/5/1999 11:17:00 AM
From: Freedom Fighter	Respond to of 132070

Mike, I think the best way to look at debt is to look at the "net" percentage increase in debt in relation to the percentage growth in nominal GDP. Surely there must be some limit to expanding debt in relation to GDP. It also makes sense to compare the net increase in debt to both domestic and imported savings. I think it also makes sense to separate financial sector debt from the combination of corporate, household, and government debt. I agree with the analysis that FNMA, FREDDIE and other related credit expansion is contributing to the financial asset bubble. I also agree that this leveraging up is putting those companies at a greater risk of loss if markets go against them. But as I understand it I am less worried about greater defaults as a result if the economy heads south. As long as the mortgage borrowers are good for the money, so will FNMA and FREDDIE generally be. In other words, in this process two debts are recorded. One is a mortgage on the non-financial side and one is a borrowing by FNMA/FREDDIE to buy the mortgage on the financial side. If we have a disaster only one entity will eat the loss when mortgage borrowers start defaulting. Either FREDDIE/FNMA, the lender to FNMA/FREDDIE, or the taxpayer. There are two debts but only one loser for the one original amount. (Granted we could have one doozy of a loser ) Wayne

To: Mike M2 who wrote (61465)	6/8/1999 10:05:00 AM
From: Lymond	Read Replies (2) \| Respond to of 132070

Mike, I believe your 260% figure includes financial sector liabilities, which is effectively double counting since these liabilities are used to fund loans to households, businesses, governments and the like. I looked at the narrowest debt measure -- non-financial private sector outstandings, i.e., borrowings by households and businesses, from the FoF report. This totaled $11.2 trillion at year-end 1998, or about 129% of nominal GDP. (Including federal and municipal debt, the ratio is 186%!) Interestingly enough, the private sector debt/GDP ratio has remained fairly constant throughout the 1990s, as it measured 127% at the beginning of the decade. On the other hand, it measured just 99% at year-end 1980. bog.frb.fed.us Where did you source your figure for the 1920s? I've looked around but haven't been able to find anything. Regards, John