.comment-link {margin-left:.6em;}
Visit Freedom's Zone Donate To Project Valour

Tuesday, June 12, 2007

Do You See What I See?

Periodically I realize that I am not getting my message across, so following Carl's example, I am resorting to pictures.

This is a graphical representation of the Constant (1982) Median wkly earnings, Emp FT, Wage & sal wrkrs - LEU0252881600 series from BLS (fourth from the top on this page).This series adjusts the median wages and salaries from the Current Population Survey by the CPI-U series, which amounts to adjusting wages for consumer inflation. The CPI-U is understated, but at least this gives us all a basis for conversation:

You can click the graph to get a larger version.

Now go back and look at the consumer debt graph in this post. Consumer debt can't keep rising when most people's real incomes aren't rising. Get it? Worse yet, interest rates are taking a hike upward because worldwide inflation is on the rise, which means both pipeline inflation and the effect of the debt-overload on consumers are due to rise. I'd say by the third quarter all hell is going to start busting loose, unless gas prices take a dive.

You don't want to know what the net worth of the average 30 year old is, because you'd become depressive. You don't want to know what this graph looks like for the next tier under, but maybe looking at Compucredit stats will give you a hint:
CompuCredit's net interest margin was 22.6 percent in the fourth quarter of 2006, as compared to 22.4 percent for the fourth quarter of 2005 and 26.0 percent in the previous quarter. The adjusted charge-off rate decreased to 11.0 percent in the fourth quarter of 2006 from 11.2 percent for the fourth quarter of 2005 and increased from 9.4 percent in the previous quarter. As of December 31, 2006, the 60-plus day delinquency rate was 14.1 percent, up from 9.3 percent as of December 31, 2005 and 14.0 percent as of September 30, 2006.
You have to charge pretty high interest rates with delinquency rates like that, but then with interest margins that high you are going to get delinquency rates like that. So what can be done? Lower interest rates:
CompuCredit's net interest margin was 17.9 percent in the first quarter of 2007, as compared to 25.0 percent for the first quarter of 2006 and 22.6 percent in the previous quarter. The adjusted charge-off rate was 12.5 percent in the first quarter of 2007, as compared to 7.1 percent for the first quarter of 2006 and 11.0 percent in the previous quarter. Also, as of March 31, 2007, the 60-plus day delinquency rate was 12.8 percent, as compared to 10.6 percent as of March 31, 2006 and 14.1 percent as of December 31, 2006.
Naturally, they swung from a nice profit in fourth quarter 2006 to a significant loss in first quarter 2007. But it could have been worse.... They bought back a bunch of shares and bought some other finance companies. Btw, FINB just fired its auditor. Maybe I'll write a book of financial nursery rhymes for politicians "Jack and Jill got their bill, rolled down the hill, defaulted, and revolted (at the ballot box)."

This is THE POLITICAL REALITY that is causing the immigration anger and the general wrath at both political parties. None of them hear what the American citizens are saying. It's been too long with no relief. Consumers can stand a few bad years, but over time it builds up.

Comments:
"...most people's real incomes aren't rising. Get it?"

No MaMa I don't get it. Please help me out. As I read the graph income has go up from 315 to about 328. What's going down?
 
Over the longer term, incomes have hardly moved up since 2000. Debt's escalated dramatically.

The low last year was really due to high inflation (these are inflation-adjusted figures).

Now with rising interest rates, you get the double whammy.
 
Hi Mom -- Can you translate "all hell's going to break loose."

About a month ago, another well-respected blogger suggested there were going to be street riots in Europe during 2H07 because of loose money policies.

What kind of hell are we talking about here?
 
"Over the longer term, incomes have hardly moved up since 2000. Debt's escalated dramatically."

Thanks for the clarification. I what you mean.
 
Bummed - political hell.

The reason for the immigration furor is economic, not just social.

American politicians should be contemplating the situation in France with great focus. Both parties in the US are walking the fine line of political disaster. Our energy policy and our immigration policy amount to an attack on the economic viability of at least a third of the American population.
 
I thought MOM's chart was too short, so I found a table that goes back to 1979, median usual weekly earnings in constant 2003 dollars at http://www.bls.gov/cps/wlf-tables13.pdf. It shows some growth in 1979 of $551 per week to $602 in 2002. What is more troubling for a man is that women earned 62% of a man's weekly earning in 1979, bit 77.9% in 2002.

There's a feeling that wages for many have been stagnant for almost 18 years and the traditional head of family, the man, is falling behind.
 
Mike - I'm trying to compare debt/income over the same period because it has more to do with the immediate future.

Your observations are true, though.
 
Post a Comment

Links to this post:

Create a Link



<< Home

This page is powered by Blogger. Isn't yours?