Household debt is a major headwind and the biggest obstacle blocking a sustainable U.S. recovery, Yahoo reported.
Yahoo Daily Ticker’s Aaron Task and Henry Blodget offered a laundry list of evidence that household debt is a significant economic problem.
“We have this absolute mountain of household debt, starting with consumer debt,” said Blodget.
Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation
“Incomes aren’t rising. … What we’ve been saved by is the decline in interest rates.”
The Federal Reserve Bank of New York said U.S. households reduced their debt by $1.3 trillion between the third quarter of 2008 and June 2012. But Yahoo noted that household debt levels are still higher than they were before the financial crisis, and 30 million Americans have on average $1,500 of debt subject to collection.
“It could take a couple of decades to work off,” Blodget said, citing similar long debt-reduction horizons after the Great Depression and after World War II.
Task noted some of the biggest U.S. multinationals that depend on household spending are showing signs of weakness in their third-quarter earnings reports. As an example, he noted Dunkin’ Brands lowered its guidance.
“If America’s running on Dunkin,’ maybe America’s not running so fast,” he said.
According to the Bureau of Labor Statistics, average hourly earnings fell 0.3 percent from August to September and 0.2 percent from September 2011 to September 2012.
Meanwhile, a new survey from the Center for Housing Policy and the Center for Neighborhood Technology found that for every $1 increase in income in the past decade, housing and transportation costs rose $1.75.
In addition, the costs for housing and transportation rose by 44 percent in the nation’s 25 largest metropolitan areas between 2000 and 2010.
The survey concluded U.S. families with moderate income now spend an average of 59 percent of their income on housing and transportation alone, leaving little available for other types of spending.
Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation
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