[quote=FlyerInHi]Student loans are a bigger worry in the shorter term. Debts are preventing household formation and home buying.[/quote]
Have to disagree, that student loans are the bigger problem (short term). Just look at the magnitude of each component of the “difficult/unserviceable debt” and the context.
Broadly speaking in ascending order, here is a list of various “debt” problem(s).
“the volume of total subprime auto loans increased roughly 15 percent, to $145.6 billion“
There is “a $518 billion total pool of HELOCs“ (i.e. people using their homes as an ATM)
I hear what you’re saying there is a “negative” feed back going on, with recent graduates having a difficult time getting a start in the job market, this kicks the can down the road of household formation and home buying BUT
There is “a [dark] cloud totaling $4.1 trillion dollars for state-administered public pension plans“
[edited 12/14/2014 – added a “link” and a graphic showing a range of PV calculation from a Harvard University’s John F. Kennedy School of Government working paper titled:
Underfunded Public Pensions
in the United States:
The Size of the Problem, the Obstacles to Reform and the Path Forward]
Keep in mind the reason I think “unfunded” public pensions will be the trigger event (of the next economic downturn) is because of the change in accounting rules starting in 2015 (which puts debts on the balance sheet and will affect “muni” bond ratings).
Looking at the big picture…
America – its government, businesses, and people – are nearly $60 trillion in debt
“The Congressional Budget Office predicts that the economy will stall by 2017 because Americans will continue spending, but wages and wealth won’t be going up…
Economists have not agreed on how to stave off the impending crisis. But Americans’ addiction to spending on credit will not help.”
