Comptroller Gen: US debt 90% of net worth of all US households

[Skidmore]

From a presentation by US Comptroller General David Walker on CSPAN yesterday. Just wanted to highlight that stat.

[don954]

1. what happens when you live way beyond your means for too long??!!

:scared:

[izzie]

4. Well if you can not get your parents to bail you out you fail

Called Bush 101, I really has to stop

[nicknameless]

2. More from DailyKos.

Lots of graphs

http://www.dailykos.com/story/2006/3/12/17506/4601

[Guaranteed]

3. Whoops!

Maybe we ought to do something about that.

[krispos42]

5. Our only hope is the worst of both worlds...

We have to tax like the neocons think we will, and spend like a true fiscal conservative has wet dreams about. And we can't do that with King George and Darth Cheney in the White House, and we can't fix that until we have a majority in the Congress.

Oy vey. How many days left? 80?

Not soon enouth

[enid602]

6. 10%

And there's a 10% early withdrawal penalty on IRA's, so if we were towithdraw all of our savings to pay the debt, we'd be broke.

[ThomWV]

7. If We Pay Off Our Credit Cards Will It Go Away

Of our net worth is the difference between the worth of our assets and what we owe on them the difference must be our credit card balance, right? So if we call one of those 800 numbers and get our debt cut in half and pay off what is left in a short time with no pain what so ever, as advertised on TV, everything will be better, right?

[ProfessorGAC]

8. Whoa, Whoa Whoa!

I think you're misreading this. They are describing the overall net worth to debt ratio of 0.9.

Now, while rich people skew this rather dramatically, most people are WAY over that.

Let's say you have a $250k house, and you still owe half, or $125k. You have a NET worth of $125k and your D/NW ratio is 1.00.

If you have a $250k house and still OWE $150k on it, your NW is only $100k. Your NW/D is 1.5.

If you have a $250k house, and you are only in the 3rd year of a 30 year mortgage, you might only own $5k of that house, so the D/NW would $245 over 5, or 49.0!

To get the number you have here, in this example, that $250k house would have about a $119k mortagage principal remaining. Then you would have a net worth of $131k against that debt load. So, now you'd have a D/NW of 0.9, or 90%.

This number is not indicating that everyone has 90% as much debt as assets. The Net Worth value already excludes debt.

So, this number is really pretty high. But, it reflects people who own their homes outright, or people like my wife and i who've been in the same house for 18 years, and only owe about 22 months on the mortgage. So, we own 95% of the house. For every person with NO debt, there are people with those D/NW of 49, as in the example above. The average then tends down toward a lower value as people own more of what they're paying for, and owe less, and assets appreciate. As new people buy new stuff, the cycle starts over. My guess (without all the data to fully analyze) is that this 0.9 value is pretty much economic equilibrium.
The Professor

[Skidmore]

9. Walker was not talking about personal debt but individual families share

of the national debt. You know, that something trillion dollar monster thingy that Congress keeps feeding with steroids?

[Deja Q]

11. We share the debt just as much as our elected reps represent us.

[ProfessorGAC]

12. Oh! Thanks. That Makes Sense Now

I thought it was the other. This number is more distrubing than i thought.
The Professor

[Skidmore]

14. Professor, I really don't know how much sense it makes but

it was something that stood out in a rebroadcast of a speech he gave yesterday and which I heard early this morning. I tried to quote him verbatim and post immediately. You'll have to bear with me a bit. I'm very hypothyroid right now in preparation for a radiation scan on Friday, and I'm not tracking as well as I would be otherwise. If I've misinterpreted or didn't commit it to prose precisely, apologies, but Walker was basically talking about how the financial outlook for the nation, Congress' responsibility for the national debt, and what needs to be changed to at least reduce the impact of this bad decision making process and/or reverse the course of these fiscal decision.

Bear with me. I'm trying hard.

[ProfessorGAC]

15. You're Doing Great!

And, good luck on the scan, Friday! Wishing you well!

The tricky part here is that an economist might look at a D/NW of 0.9 and see it as a sign of health, in that people, in the overall, have a true net worth. While some people are way above 1.0, others must have a true net worth. And, for the overall economy and financial outlook, it would mean that held value exceeds total debt.

But, if this means the fraction of public debt v. the overall net worth of individuals, that's bad. It means that for every $1 of personal net worth, there are 90 cents of public debt. That's very high. So, if it meant what i thought the first time, that's pretty healthy. If it means what you've described the 2nd time; not good!
The Professor

[Deja Q]

10. and if more people were able to keep their jobs,

they'd be able to pay it back more quickly. (especially if the cost of living were to go down.)

:think:

[Lone_Star_Dem]

13. That's a sobering realization.

Our national debt has become like the blob...Indescribable... Indestructible! Nothing Can Stop It! It's the deficit that that ate America!

Why is it when I try and strike up a conversation with Average Joe American they either don't know, don't care or a combination of both about the financial state of our nation? When I was a kid growing up in the 70's this sort of stuff was all over the news and common household conversation. Now-a-days you have to dig and look hard if you want to have any real information.