Skyrocketing Consumer Debt & Falling Rates
With home mortgages, the primary collateral for the loan balance is the home itself. In the event of a future default, the lender can file a foreclosure notice and take the property back several months later. With automobile loans, the car dealership or current lender servicing the loan can repossess the car.

Homeowners often refinance their non-deductible consumer debt that generally have shorter terms, much higher interest rates, and no tax benefits most often into newer cash-out refinance mortgage loans that reduce their monthly debt obligations. While this can be wise for many property owners, it may be a bit risky for other property owners if they leverage their homes too much.

With credit cards, lenders don’t have any real collateral to protect their financial interests, which is why the interest rates can easily be double-digits about 10%, 20%, or 30% in annual rates and fees, regardless of any national usury laws that were meant to protect borrowers from being charged “unnecessarily and unfairly high rates and fees” as usury laws were originally designed to do when first drafted.

Zero Hedge has reported that 50% of Americans don’t have access to even $400 cash for an emergency situation. Some tenants pay upwards of 50% to 60% of their income on rent. A past 2017 study by Northwestern Mutual noted the following details in regard to the lack of cash and high credit card balances for upwards of 50% of young and older Americans today:

* 50% of Baby Boomers have basically no retirement savings.

* 50% of Americans (excluding mortgage balances) have outstanding debt balances (credit cards, etc.) of more than $25,000. 

* The average American with debt has credit card balances of $37,000, and an annual income of just $30,000. 

* Over 45% of consumers spend up to 50% of their monthly income on debt repayments that are typically near minimum monthly payments.


Rising Global Debt 


According to a report released by IIF (Institute of International Finance) Global Debt Monitor, debt rose to a whopping $246 trillion in the 1st quarter of 2019. In just the first three months of 2019, global debt increased by a staggering $3 trillion dollar amount. The rate of global debt far outpaced the rate of economic growth in the same first quarter of 2019 as the total debt/GDP (Gross Domestic Product) ratio rose to 320%.

The same IIF Global Debt Monitor report for Q1 2019 noted that the debt by sector as a percentage of GDP as follows:

Households: 59.8%

* Non-financial corporates: 91.4%

* Government: 87.2%

* Financial corporates: 80.8%


Rate Cuts and Negative Yields

As of 2019, there’s reportedly an estimated $13.64 trillion dollars worldwide that generates negative yields or returns for the investors who hold government or corporate bonds. This same $13.64 trillion dollar number represents approximately 25% of all sovereign or corporate bond debt worldwide. 


On July 31, 2019, the Federal Reserve announced that they cut short-term rates 0.25% (a quarter point). Their new target range for its overnight lending rate is now somewhere within the 2% to 2.25% rate range. This is 25 basis points lower than their last Fed meeting decision reached on June 19th. This was the first rate cut since the start of the financial recession (or depression) in almost 11 years ago dating back to December 2008.

It’s fairly likely that the Fed will cut rates one or more times in future 2020 meeting dates. If so, short and long-term borrowing costs may move downward and become more affordable for consumers and homeowners. If this happens, then it may be a boost to the housing and financial markets for so long as the economy stabilizes in other sectors as well such as international trade, consumer spending and the retail sector, government deficit spending levels, and other economic factors or trends.

We shall see what happens in the near future in 2020 and beyond.

* The blog article above is a partial excerpt from my previous article entitled Interest Rate and Home Price Swings in the Realty 411 Magazine linked below (pages 87 - 91):
August 1, 2008

U.S. Banks Borrow More Than $17 Billion Per Day From The "Federal" Reserve

As the Credit Crisis continues to cause financial institutions to plunge in a downward descent toward the abyss, banks continue to borrow record amounts of money from the privately held and controlled "Federal" Reserve. The rate of borrowing from the "Fed" is now averaging close to $17.5 Billion PER DAY through the "Fed's" various auction facilities such as the Term Auction Facility, the Discount Window, or other methods.

Doesn't the general public understand that banks are essentially being "nationalized", and / or that their power and control is being transferred to those people who own and control the "Federal" Reserve? Remember, the "Federal" Reserve is privately held and controlled. They are a private monopoly that circumvents the U.S. Constitution by controlling our money supply through a variety of ways. 

The Fannie Mae and Freddie Mac bailouts will probably end up being controlled by the privately held "Fed". This represents between 50% and 70% of the U.S. mortgage market depending upon whose numbers you believe. The monopoly of power and money, and the continued centralization of our "corporatist" government / private leadership is completely changing the landscape of America. 

"Corporatism" is replacing capitalism as the leaders of our country continue to follow the horrific economic policies created by Milton Friedman (the deceased Nobel Prize winning economist from the University of Chicago). Friedman had a history of creating newly formed economic models in countries like Brazil, Chile, Argentina, Poland, and even Russia in the '90s. 

His economic models usually wiped out the middle class, devalued their respective currencies so much that the governments were "forced" to create new currency forms, sold off prime government assets to privately held U.S. and international, and created somewhat privately controlled centralized (or "corporatist") governments. Friedman's economic "shock" policies usually hit the citizens so fast that they didn't have time to react or protest against the new economic and governmental abuses. 

Are Friedman's "shock" policies being created here in the U.S. now with the Credit Crisis meltdown, the reduction of citizens' rights, the transfer of prime government assets to more private entities, the massively declining U.S. Dollar, and the real possibility of a newly created currency in the near term such as the proposed "Amero" as part of the new North American Union (U.S., Mexico, and Canada)? 

If you get a chance, please read the excellent book by Naomi Klein entitled The Shock Doctrine: The Rise of Disaster Capitalism. This book brilliantly outlines what has happened to the U.S. and world over the past 30 years. It is one of the best books that I have ever read. Please educate yourselves in regard to what is happening around the world as the world is changing dramatically.


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