[copious.abundance]

--> Marketwatch <--

Stung by the loss of more than $2.8 trillion in their net wealth, the nation's households paid down their debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday.

As of Sept. 30, households' total outstanding debt shrank at an annualized rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It's the first decline in household debt ever recorded in the report.

Households paid off more mortgage debt than they took on for the first time on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion.

Other consumer debts, such as credit cards and auto loans, increased at a 1.2% annual rate in the quarter to $2.6 trillion.

Total U.S. domestic nonfinancial debt increased at a 7.2% annual rate, boosted by a postwar record 39.2% increase in debt taken on by the federal government.

Business debt increased at a 2.9% annual rate, the slowest in five years. Corporate debt rose at a 3.7% annual rate, a four-year low.

[...]

[Jester]

That's an incredibly lovely skewed bit of info when stated with no context of relevance.

Households paid off more mortgage debt than they took on for the first time on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion.

That statistic is largely influenced by the lack of new mortgages. With it far harder to get a mortgage, of course there will be less mortgage debt added.

Other consumer debts, such as credit cards and auto loans, increased at a 1.2% annual rate in the quarter to $2.6 trillion.

When things get tight, people do turn to credit cards (which of course will just make it worse later).

Business debt increased at a 2.9% annual rate, the slowest in five years. Corporate debt rose at a 3.7% annual rate, a four-year low.

Again, difficulty in securing financing means less increase in debt. Businesses that go out bankrupt drop out of the debt category too.

[Snowrunner]

Two things come to mind:

1. Too little, too late.
2. The decline is int he Mortgage part, could it be that's because the banks just don't give Mortgages anymore?

[jdmartin]

Two things come to mind:

1. Too little, too late.
2. The decline is int he Mortgage part, could it be that's because the banks just don't give Mortgages anymore?

More than not giving mortgages I think it's this: houses were worth say $500k. The house is foreclosed on, the loan wiped, and is resold at $350k (the new value, assuming we found a buyer). Booyah! Total mortgage debt on that house reduced by $150k. We're all saved!

I also think part of it might be that people who still have money, and jobs, are scared and are trying to pay down some debt instead of spend on, spend on. But this could easily be counteracted by people who are living their last hours on Visa/MC right now.

[Snowrunner]

I also think part of it might be that people who still have money, and jobs, are scared and are trying to pay down some debt instead of spend on, spend on. But this could easily be counteracted by people who are living their last hours on Visa/MC right now.

Yeah if you look at it, CC debt actually increased, so something / somebody is fudging the numbers.

[Tyler_JC]

More than not giving mortgages I think it's this: houses were worth say $500k. The house is foreclosed on, the loan wiped, and is resold at $350k (the new value, assuming we found a buyer). Booyah! Total mortgage debt on that house reduced by $150k. We're all saved!

But isn't that exactly what should be happening?

Houses are overpriced, people have mortgage payments they can't afford, banks have junk assets on their books.

We need bankruptcies to clear out the cobwebs from the economy.

That's Capitalism.

The dumb get crushed and the smart take over.

I'm thinking about pooling together some money to buy a distressed property around here. The rental value would be significantly higher than the mortgage+taxes.

Why the bank doesn't just rent the place out is beyond me....whatever. Their loss, my gain.

[Eli]

They didn't pay down their debt they defaulted on their debt.

With the foreclosures going down as fast they can that is a lot of debt that is being removed from the system.

[Snowrunner]

With the foreclosures going down as fast they can that is a lot of debt that is being removed from the system.

Problem is: It doesn't just get removed, someone HAS to take a hit.

If it's not the bank issuing the mortgage then it is whoever bought it.

yeah, it'll take us 10 years to figure out who actually really is on the hook and another 10 years just to figure out whose got to pay.

Then we're running into peakoil if Climate Change doesn't get us first.

[uNkNowN ElEmEnt]

From Market Ticker Forum:

Will it ever end?

"Stung by the loss of $2.81 trillion in their net wealth, U.S. households paid down their debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday. As of Sept. 30, households' total outstanding debt shrank at an annual rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report"

No they didn't.

What really happened is that households defaulted on mortgages at an increasing rate, and in all other categories of debt they are attempting to stay ahead of (what are inevitable) defaults there too by adding to credit card exposure!

Further:

Total U.S. domestic nonfinancial debt increased at a 7.2% annual rate, boosted by a postwar record 39.2% increase in debt taken on by the federal government.

Right. The government is accelerating the train - and the mountain is clearly visible and getting closer at an increasing rate of speed.

What a load of crap.

PS: Most of this "new debt" being taken in an insane attempt to prevent the contraction in GDP that must occur will default as well. Have a look at the earlier Ticker from today; the math is what it is, whether people want it to be that way or not.

We have taken a 10% GDP drop in 2000 and turned it into a 20% one in August of 2007. Now, with the actions of the last year and change (especially the last six months) we've turned that into a thirty percent GDP correction that must occur (that is, an increase of 50% in SIX MONTHS!) and if we don't stop this crap it will nearly double again by next June.