What Does 'Deleveraging' Really Mean? Cutting Our Addiction to Debt

The consumer has clamped down because taxes - property taxes in particular - are killing most homeowners. Property taxes are making the American Dream of homeownership a lost ideal. The property tax bubble is yet another primary problem, and may become the biggest impediment to growth as discretionary income is swallowed up by government prostitutes. IF the PROPERTY TAX BUBBLE bursts signaling government giving power back to the PEOPLE, the economy will thrive. IF not ... Hello comrades.

Silver Surfer... Whatcha got for us?

Great observation. The question is: how do we do the deleveraging without destroying the structure of American (world) business? The banking community is set for managing large debt (it is where the bucks come from), while business is managed to business models that run/operate on borrowed capital, and consumption is over 50% based on short to medium term credits. That is not easy to back away from without hurting some parties. It is not over and it will cost the public vastly more than%2

PROPERTY TAXES have doubled for most in the past 10 years, where private sector income remained level or slightly decreased. Public sector average income past that of private sector income. This does not even account for the hidden and unknown pension cost that are future expenses based on the highest salary of public employees whose contribution is less than 5% of salary (compared to private contributers to 401K at 15%), and the average government pension payout is $3,645 per year versus $2,940 annual payout from a private 401K.

Property taxes are 25% of the monthly cost of home ownership for homes bought since 2002. Property taxes are 50% of monthly housing costs for homes bought before 1997. The property tax bubble was government biggest tax increase in the last 10 years. It must burst to avoid a home ownership crash!

You propose the proper solution. Unfortunately, the government has and will continue to chose to devalue the currency in an attempt to inflate away our debts.

Great observation. The question is: how do we do the deleveraging without destroying the structure of American (world) business (society)? The banking community is set for managing large debt (it is where the bucks come from), while business is managed to business models that run/operate on borrowed capital, and consumption is over 50% based on short to medium term credits. That is not easy to back away from without hurting some parties. It is not over and it will cost the public vastly more than they are being told, but they will never understand.

Great observation. The question is: how do we do the deleveraging without destroying the structure of American (world) business (society)? The banking community is set for managing large debt (it is where the bucks come from), while business is managed to business models that run/operate on borrowed capital, and consumption is over 50% based on short to medium term credits. That is not easy to back away from without hurting some parties. It is not over and it will cost the public vastly more than they are being told, but they will never understand.

Debt, a form of slavery. Get used to it if you must keep up with the Jones's

This requires thinking long term, and willing to accept sacrifice in the short term. Common sense really, the idea of which always causes a smirk on the faces of our wise men. Common sense implies common knowledge, and that will never do. Doing without and lessening debt and increasing savings mean our consumer driven economy will slow down and a lot of pain, unevenly applied will prevail until we have the necessary savings to get the economy growing again. The whole thing is doable, if we create goals and policies which steer us toward less debt and more savings and policies which help those most hurt by such a sea change in our thinking. Making credit less available for consumption, while encouraging investment in a stronger future is where our wise men should be leading us. At least that is the way one person sees it, who learned what little economics he knows from Paul Samuelson's text book in the 50's.Who needs all the junk we buy, anyway?

Our economy has been inflated by the use of leverage in EVERY LEVEL - as americans work to reduce our debt there will be companys that will have to go away, there simply won't be the need for as many of them. That's at ALL levels, of ALL sizes. History will call this time THE GREAT RECESSION. We're now at the place where families (of all sizes) are choosing between paying their charge cards or paying their mortgage... the credit card bubble is about to bust. The first round of foreclosures was from those who had marginal credit - this round is of those with better credit (they have credit cards). We're still feeling the ripple effects... the lower middle class, now the middle class and soon the upper middle class.... THEN the upper class. We have months to go.

We've inflated this economy for almost 30 years... we can't solve it in a quarter.. it's going to take another generation to 'right size' this economy. THE GREAT RECESSION IS HERE.

My property taxes (I pay separate) is 7.3% of my loan + ins + taxes monthly. I live in a rural, unincorporated area. In my old house - they were 22% of the payment (If i figured it - payed separately). With my states' new supposed "cap" property taxes to 1%, 2% or 5% of property's value (depending on owner-occupied, rental, or business), that will mean with the drop in home prices that a lot of GOVENRMENTS will have to live with a HELL of a lot less - they are saying up to $1T less in tax revenues, although the common range seems to be about $750M. Simple - People, Businesses, Etc, NEED TO LIVE WITHIN THEIR MEANS. Debt early on for reasonable acquisition of property, material, invenotry is one thing, but I've got Kohls within 10 miles. My bank has two branches within a mile. We build stores upon stores on top of one another. Personally, I'd love to see them bulldozed back to field - I don't shop there anyway, thats why I'm not in debt!

Regarding savings, since the 1960's, any dollar "saved" would by less within a few months, aka dollar devaluation by monetary inflation. (A few exceptions, e.g. PCs.) No incentive to save. Thus any savings were "invested" in hopes of increasing returns. And to further increase returns leverage up! Which works only as long as positions are gaining in value! To encourage saving the saved dollars must hold or increase in value, aka dollar appreciation or monetary deflation. Unlikely that will be allowed, as it puts almost every family, company, and government entity deeply underwater in debt with stuff below loan value.

Silver Surefer in--- change of strategy. Sell it all, take your profits while you can. Obama is now a lock. The party of excess is over for at least a decade. Rip tide is going to tear your bathing suit to shreds and everyone will see that you are really a girl. Wait until issues are below book but still giving dividends. Those are the only ones to buy and hold in the future. Silver Surefer out.

My property taxes (I pay separate) is 7.3% of my loan + ins + taxes monthly. I live in a rural, unincorporated area. In my old house - they were 22% of the payment (If i figured it - payed separately). With my states' new supposed "cap" property taxes to 1%, 2% or 5% of property's value (depending on owner-occupied, rental, or business), that will mean with the drop in home prices that a lot of GOVENRMENTS will have to live with a HELL of a lot less - they are saying up to $1T less in tax revenues, although the common range seems to be about $750M. Simple - People, Businesses, Etc, NEED TO LIVE WITHIN THEIR MEANS. Debt early on for reasonable acquisition of property, material, invenotry is one thing, but I've got three Kohls within 10 miles. We build stores upon stores on top of one another. Personally, I'd love to see them bulldozed back to field - I don't shop there anyway, thats why I'm not in debt!

Ah! Socialism will be needed to replace the debt! Fools! The lesson of the chart is that confidence in the Socialist period declined due the pessimism that culture generated. There isn't too much debt, just too little income being anticipated. Both candidates are Socialists (one may be a Communist when properly viewed) or appeasing government expansion, so confidence is in radical decline. We can look forward to ten times the GSE losses thanks to this direction.

Whit Chambers, I don't like property tax either but WHERE do you live that your property tax is 25-50% of the monthly cost of owning a home?? I live in a $500,000 home and my property tax is about $1600 per year. The debt on the other hand is quite a bit higher :-) If I were you I'd think about coming on down to SC. But to the point of the article - as a country and economy we have most certainly been living on borrowed money and time.

Whit Chambers, I don't like property tax either but WHERE do you live that your property tax is 25-50% of the monthly cost of owning a home?? I live in a $500,000 home and my property tax is about $1600 per year. The debt on the other hand is quite a bit higher :-) If I were you I'd think about coming on down to SC. But to the point of the article - as a country and economy we have most certainly been living on borrowed money and time.

The only debts I have ever really incurred are my house payment, and I never refinanced it to realize its equity. Funny, I am a mortgage officer too. I was raised to be realistic in all of my bills, spending, debt load, and never needed to validate myself with brand new trendy items. The instant gratification that the last 30 years has deemed as necessary in our consumer society is what truly led to our situation we are currently in. No ONE person or administration. A habit of "buy now and pay later" is what got us where we are.