America’s Debt Problem.

Annual savings       1945   $9,906

Amount of debt      1945   $7,754

 

Annual savings        1965   $5,167

Amount of debt       1965   $36,903

 

Annual savings         1985   $6,518

Amount of debt        1985   $46,908

 

Annual savings         2005    $449

Amount of debt        2005    $111,527

Now if this does not alarm you, what other stats do I have to place here. Much of this information I gleaned from a New York Times article. The article is well worth the read. There are a combination of factors here. Lenders and individual responsibility and discipline.

Just two generations ago, America was a nation of mostly thrifty people living within their means, even setting money aside for unforeseen expenses.

Today, Americans carry $2.56 trillion in consumer debt, up 22 percent since 2000 alone, according to the Federal Reserve Board. The average household’s credit card debt is $8,565, up almost 15 percent from 2000.

College debt has more than doubled since 1995. The average student emerges from college carrying $20,000 in educational debt.

Household debt, including mortgages and credit cards, represents 19 percent of household assets, according to the Fed, compared with 13 percent in 1980.

Even as this debt was mounting, incomes stagnated for many Americans. As a result, the percentage of disposable income that consumers must set aside to service their debt — a figure that includes monthly credit card payments, car loans, mortgage interest and principal — has risen to 14.5 percent from 11 percent just 15 years ago.

By contrast, the nation’s savings rate, which exceeded 8 percent of disposable income in 1968, stood at 0.4 percent at the end of the first quarter of this year, according to the Bureau of Economic Analysis.

More ominous, as Americans have dug themselves deeper into debt, the value of their assets has started to fall. Mortgage debt stood at $10.5 trillion at the end of last year, more than double the $4.8 trillion just seven years earlier, but home prices that were rising to support increasing levels of debt, like home equity lines of credit, are now dropping.

After working at a mortgage company (who DIDN’T) this last year, my brother was intrigued by the amount of interest only (or I.O.–more like I OWE) loans individuals were locking into, along with adjustible rate mortgages (or A.R.M.–because that’s what it’ll eventually cost you). Something’s gonna have to give for the problem to fix itself.