Friday, November 20, 2009

Much indebted to ya

Obama: Too much debt could fuel double-dip recession
With the U.S. unemployment rate at 10.2 percent, Obama told Fox News his administration faces a delicate balance of trying to boost the economy and spur job creation while putting the economy on a path toward long-term deficit reduction.

"It is important though to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession," he said.

Foreclosure, delinquency rates spike amid growing unemployment
About 9.6 percent of borrowers were delinquent on their mortgage during the third quarter, according to the survey by the Mortgage Bankers Association, and 4.5 percent more were somewhere in the foreclosure process. Overall, about 14 percent of mortgage loans were delinquent or in the foreclosure process during the quarter, according to the group.

That is the highest level ever recorded by the survey, which has been conducted since 1972.

Also, the challenge is also continuing to shift from the subprime loans that sparked the housing downturn to prime loans, which are traditionally considered safer and make up the bulk of the mortgages outstanding in the country. Of the loans in foreclosure during the quarter, about 55 percent were made to prime borrowers, compared with 37 percent that were subprime.

UPDATE 1-U.S. mortgage rates sink to or near all-time lows
Despite the rock-bottom borrowing costs, applications to buy homes sank last week to a 12-year low, the Mortgage Bankers Association said on Wednesday.

Baloise chief warns low rates could topple insurers
Continued low interest rates could cause some insurers to collapse, the chief executive of Baloise (BALN.VX) warned on Thursday, using Japan in the 1990s as an example.

The collapse of insurers in Japan under such circumstances in the 1990s should be a warning to insurers now, at a time of unprecedentedly low interest rates, he said.

The present Zero Interest Rate policy (ZIRP) is helping to inflate a 3rd stock market bubble in the last decade.

Société Générale tells clients how to prepare for potential 'global collapse'
In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.



Post a Comment

Links to this post:

Create a Link

<< Home