Third Bubble Rising?
They're coming in three's it seems - bubbles that is.
Let's set aside for a moment the massive increase in government spending, resulting in huge government debts both here in the U.S. and in many other countries around the world, supported by central bank's creating the money needed for governments to issue debt when there's no one else around to buy it. We're setting it aside because it alone is reported to be around $100 trillion and can easily hide the private debt that's grown in its shadow.
As for that private debt, it now stands at around $120 trillion worldwide. And here in the U.S. we're contributing to the explosion of private debt by, among other things, blowing up what now looks like three bubbles: automobiles, student loans, and credit cards.
Auto Loans
One way to "see" the ubiquitous auto lending that accounts for the "robust" car sales figures we've seen recently is to simply look around you. I've never seen so many new or fairly new cars swimming about - with the dual emphasis on both "new" and "so many." Anyone with a pulse can walk into just about any car dealer these days and get a new car fully financed, either as a lease or an auto loan. Lending based on pulse typically signals "bubble."
Student Loans
Ever since the government shoved aside banks as the source of student loans, these have exploded, all in the name of giving everyone the opportunity to go to college. Again, "everyone" appears to consist of anyone who manages to get through high school and - you got it - has a pulse. So we're back to lending based on pulse signalling "bubble."
Credit Cards
And so we inevitably and perhaps predictably now arrive at a point we last saw prior to the 2008 crisis: credit cards for anyone with a pulse:
To repeat: Lending based on pulse signals yet another bubble.
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Let's set aside for a moment the massive increase in government spending, resulting in huge government debts both here in the U.S. and in many other countries around the world, supported by central bank's creating the money needed for governments to issue debt when there's no one else around to buy it. We're setting it aside because it alone is reported to be around $100 trillion and can easily hide the private debt that's grown in its shadow.
As for that private debt, it now stands at around $120 trillion worldwide. And here in the U.S. we're contributing to the explosion of private debt by, among other things, blowing up what now looks like three bubbles: automobiles, student loans, and credit cards.
Auto Loans
One way to "see" the ubiquitous auto lending that accounts for the "robust" car sales figures we've seen recently is to simply look around you. I've never seen so many new or fairly new cars swimming about - with the dual emphasis on both "new" and "so many." Anyone with a pulse can walk into just about any car dealer these days and get a new car fully financed, either as a lease or an auto loan. Lending based on pulse typically signals "bubble."
Student Loans
Ever since the government shoved aside banks as the source of student loans, these have exploded, all in the name of giving everyone the opportunity to go to college. Again, "everyone" appears to consist of anyone who manages to get through high school and - you got it - has a pulse. So we're back to lending based on pulse signalling "bubble."
Credit Cards
And so we inevitably and perhaps predictably now arrive at a point we last saw prior to the 2008 crisis: credit cards for anyone with a pulse:
"Lenders in general have really saturated the higher-credit-quality market, so it is only natural that as they look for growth opportunities, they expand downward," said Randy Hopper, vice president of consumer lending at Navy Federal Credit Union, an institution based in Vienna, Va., that is the largest credit union in the U.S."Only natural"? How is it "natural" for responsible lenders to conclude that in order to grow their business they will lend to people who, for all intents and purposes, are not creditworthy. Is this where our culture of debt has led us, to the point where such irrational, even perverse thinking appears "only natural"? Only natural to lend money to people with a pulse? It appears that this is precisely where it has led us, and so we find private debt's third bubble - "sub-prime" credit cards - now expanding.
To repeat: Lending based on pulse signals yet another bubble.
More...
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