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):
Page 10 of 24
January 5, 2009

1st Trust Deed Investment Opportunities - 10% + Annual Yields At Low LTVs


A big part of what we do through our Credit Crisis website is to find the best opportunities for our large national database of investors or readers of the national publications like Creative Real Estate Magazine where many of my articles have been published for almost the past decade. 

We are now working on many transactions in which we are assigning a partial interest or the entire principal amount of a new or an existing 1st Trust Deed (or Mortgage) to investors at substantial price discoun...


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December 30, 2008

The Problems Associated With Our Fractional Reserve Banking System


Of all of the money currently in circulation in America, only 3% is actually physical money (i.e. cash). The rest of the "money" in the USA is computerized, digital money (please watch video #1 in the "Videos" section of this website for more details). 

The American banking system is actually a giant Ponzi scheme which dwarfs the recent $50 to $100 Billion dollar (per various articles) Madoff scandal in New York. While our banks, the "Federal" Reserve, and the U.S. Treasury may legally create mo...


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December 23, 2008

U.S. Home Prices Drop The Most Ever In November '08


The median price for a U.S. home fell 13% from a year earlier to a national median sales price of $181,300. This may have been "probably the largest price decline since the Great Depression", said Lawrence Yun (the National Association of Realtors Chief Economist).

Typically, the holiday months of November and December are some of the slowest home selling months nationwide. However, these bleak November sales numbers are very concerning to many of us. New home sales also fell 11.5% during the la...


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December 17, 2008

3rd Quarter Results For The U.S. Economy Are "Scary"


Listed below are 3rd Quarter 2008 results for the U.S. economy. Was this the worst financial quarter in the history of America? In terms of financial losses, the answer has to be "yes" as the total combined dollar losses are staggering. Some of the "scary" economic data for the 3rd Quarter include the following:

* U.S. households lost $647 billion in real estate values.
* Stock values dropped $922 billion.
* Mutual Funds lost $523 billion.
* Life Insurance values & pension fund reserves lost $65...


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December 16, 2008

U.S. Home Values Drop $2 Trillion In 2008


Almost 12 million Americans are now "upside down" in their homes as their current mortgage debt exceeds the existing value of their respective homes. Per Reuters, total U.S. home values may have dropped over $2 Trillion in 2008 alone through just the 1st three quarters of the year. These numbers do not include our current 4ht quarter '08 projections. 

Personally, I think the total combined value drops are much higher than these "conservative" numbers. As lending continues to tighten up, near ter...


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December 11, 2008

Treasury Bills Now Trading At Negative Numbers & 30 Year Mortgages Hit New Lows


Within the past few days, Treasury Bills have risen which has pushed their respective yields to below ZERO for these three-month Treasury Bills. The U.S. Treasury recently sold $27 billion of three month bills at a discount rate of .005%. This is the lowest rate and yield since the Great Depression era of 1929.

The 10 year Treasury Note's yield also has hovered in the 2.6 to 2.75 rate range in recent weeks. 30 year fixed mortgage rates are typically tied to the 10 year Treasury Yield. As a resul...


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December 10, 2008

Mainstream Media Newspapers Continue To Fail


The Tribune Company, owner of the Los Angeles Times and the Chicago Tribune newspapers, filed for Chapter 11 bankruptcy protection on Monday due to mounting debts and reduced readership and advertising revenues.

In addition, The New York Times Company may be forced to borrow up to $225 million against the collateral of their primary office building in New York City. The New York Times Company also recently reported that their annual sales were down over 50%.

Sadly, the USA Today newspaper now co...


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December 8, 2008

The World's Financial Crisis Is Causing More People To Go Hungry


Almost 1 billion people (in 60 countires) on our planet may not be getting enough food to eat as the world's financial markets continue to meltdown. As many as 25,000 men, women, and children are dying each day, according to a report from the World Bank. This means that potentially one in six people on Earth are not getting enough food to eat.

Children's fragile health systems are being ravaged by stunted growth and rampant diseases due to the loss of good nutrition. Almost 2.3 billion people on...


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December 4, 2008

Will The Bailout Loans Actually Help The USA?


All of these recent bailout plans passed in the past few months are supposedly going to help solve the financial problems of the American economy. Between the $700 Billion (or is it more like $5 to $10 Trillion) Banker Bailout Plan, the $250 Billion Bank "Investment" Plan to 9 major U.S. banks (including Wells Fargo  & Bank of America), and the TRILLIONS of dollars "lent" by the privately held "Federal" Reserve through some of these major ANONYMOUS lending facilities:

* The Primary Dealer Credit...


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December 2, 2008

The Hyperinflationary Depression


The financial solvency of the few remaining major banks and investment banks in America who have not been bailed out by the U.S. government or provided with anonymous loans via the Term Auction Facilities or the Term Securities Lending Facility continues to be a major problem. 

Regardless of the massive liquidity injections from the government or the "Federal" Reserve as well as the significant drops in both short and long term interest rates, most financial institutions, insurance companies, au...


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