Friday, December 12, 2008

Household Debt

I thought I might have some good news to report.

As of Sept. 30, the total outstanding debt for households shrank at an annualized rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It's the first decline in household debt ever recorded in the report.

Upon further revue, the real reason for the fall:

Mortgage debt fell at a 2.4% annual rate to $10.54 trillion, as foreclosures mounted and fewer new mortgages were taken on.

It's difficult to increase household debt when you don't have a household. Meanwhile, credit card use continues unabated.

Other consumer debts, such as credit cards and auto loans, increased at a 1.2% annual rate in the quarter to $2.6 trillion.

Running up the credit card now might not be such a bad idea. With all the government borrowing, the value of the dollar will certainly fall in the future. It's a kind of 'spend it while you have it' mentality. As for me, I got rid of my last credit card years ago and am unlikely to get another one anytime soon.

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