Consumer borrowing is climbing at the fastest pace in more than five years, but with jobs still uncertain, they may be digging themselves into a familiar fiscal hole.
IOUs held by U.S. households rose 1.1% in the third quarter to $11.3 trillion, according to the Federal Reserve Bank of New York. That’s the biggest jump since the first three months of 2008.
Meanwhile, student debt continues to pile up as tuition and other higher-education costs become increasingly out of reach for many families.
Outstanding student-loan balances climbed $33 billion to $1.03 trillion in the third quarter, and a record 12% of loans were delinquent 90 days or more, the New York Fed said.
At the same time, many people with a more secure financial footing have rediscovered the pleasures of buying homes and cars and college educations — even though they may not have the money.
Consumer spending accounts for roughly two-thirds of U.S. economic activity. So if people are buying stuff — even with borrowed bucks — the economy is growing.
The question is whether Americans have become better money managers as a result of the recession and subsequent doldrums. Or are we just going to dig ourselves back into a familiar fiscal hole?
The answer is the American consumer is going to dig themselves back into a fiscal hole, just as the Federal Government is doing with escalating national debt.
What needs to be understood is that there are two kinds of debt: consumer debt and asset-based productive capital debt.
Consumer debt does not pay for itself and requires a source of income to pay off the debt, or to ever be holden to the lender paying monthly interest payments.
Capital credit debt is self-financing in that the investment is made on the premise that the created productive capital asset(s) will produce income for its owner, and that the earnings from the investment will pay for the capital credit loan typically in 5 to 7 years, and thereafter return annual earnings dividends.
What we need in America is to reform the financial system so that EVERY citizen can acquire ownership in newly formed wealth-creating, income-producing capital assets using insured, interest-free capital credit loans repayable out of the FUTURE earnings of the investments, without having to invest with past savings or secure the loan through equity pledges (such as homes).
How to accomplish building a Capital Ownership Culture is an integral part of the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797 and action plan as spelled out in the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm. See the full Act at http://cesj.org/homestead/strategies/national/cha-full.pdf.
http://www.latimes.com/business/la-fi-lazarus-20131229,0,2343000.column#axzz2ovYu5qkm
