@Anonymous wrote:
@Revelate wrote:
I think though we will see more corporate defaults and I don't know how that will play: in theory banks are probably hoping the discretionary spending goes back to normal before things get truly bad but they are going to want to keep customers that aren't exhibiting stress.I've been running backups all day and watching cable news. They've shown several cities with people out shopping just like on a normal afternoon. One of them was Los Angeles. It was really nice to see.
This next couple weeks should be interesting. I work in a field that deals with heavy industry/auto and similar types of manufacturing, and this next week things will start to really ramp up. Step 1 starts Monday with the cadenced restarts.
I think we'll really know if this is all going to work within a few weeks.
Yeah there will be a lag in the time domain, but as I opined on a different thread if the giant Petrie dishes that are Texas and Georgia don't go all COVID-NYC style we'll pull through.
Admittedly I am just going to be holding cash for the interim in case it does go pear-shaped again.
@Anonymous wrote:According to this report from FRED, consumers have the lowest amount of debt in decades.
https://fred.stlouisfed.org/series/TDSP
So these headlines stoking fear about consumer debt is just fake news. Tell me I'm wrong and show data.
Not saying your wrong but that graph is about servicing the debt, and depicts the falling interest rates and some of the wage gains over the last several years too.
The actual debt load, that keeps increasing from Fed data too. One such example from New York Fed:
https://www.newyorkfed.org/newsevents/news/research/2020/20200211
Agreed it's different ways of looking at the analysis and right now debt is cheaper than it has ever been before and perhaps ever will be again, but it doesn't have to stay that way. If interest rates for some unknown reason go back to what they were in '80, the debt servicing graph is going to skyrocket.
Admittedly I don't know if we are ever going to see that, comparatively low rates may be here to stay over the long term.
@Anonymous wrote:It doesn't matter how high the debt is, as long as its serviceable. And right now it's very serviceable. Rates won't go up for years, in fact they'll probably go negative. Get ready for 0% interest loans and $2,000 a month UBIs! Stocks will continue to grind higher, all these fear mongering about debt is blowing hot air.
Eh, I'll bite.
Agreed there are macro economic policy theories which suggest nation-states have effectively infinite money to continue debt financing... I'm not educated enough to truly argue that one way or another (increases in spending offset by increases in GDP + tax revenues as a result); however, consumers aren't nation states in terms of our income generation.
There's some upper bound to how much money I or probably (statistically) you make: namely, number of hours worked x average bill rate, or some facimile thereof. There's only 168 hours in a week, as humans we have to sleep, and you can see I think where I'm going with this: earning potential is finite short of those with serious inheritences or trust funds or similar where passive or investment income can be orders of magnitude higher than us wage slaves.
The vast majority of us are wage slaves, and as a result we make up the lion's share of the consumer debt graphs shown and at some point our debts become unservicable regardless of prevailing interest rates, I think it's pretty clear that macroeconomic spending theory can't be applied to our little microeconomic universes. Your comment about 0% loans, I'm more than skeptical on that one: look at the mortgage market, there's clearly a floor around 3% (at par, yes this can be bought down) regardless what the Fed interest rate is that doesn't apply directly to consumer loan pricing.
I'm actually even skeptical of the macroeconomic theory too, look at all the budgetary shortfalls for state and local governments right now and federal tax revenue is going to decrease as well; those have economic follow-on effects: I may well lose the gig I actually like because right now I sit in a group that supports state and local governments. Sure, for me I'll be OK, I have N+1 jobs at this point and if I lose one oh well financially it won't crush me... bringing it back to microeconomics, that's not the case for most people. Job loss, disability, disease, humans are fragile and we can't support effectively infinite debt.
Ergo, size matters.