Re Steve K's : I think that Steve makes some important points below. In reading the following, another recent news story comes to mind: the action by the US Congress -- with wide wide bi-partisan support from Democratic Party members -- to legally prevent individuals from declaring bankruptcy as a way of eliminating personal credit card debt. Some of the figures on credit card debt by working class families are truly staggering. And a large reason for this debt has been the phenomenally high interest rates charged by credit card companies and the banks whose name those cards are issued in. Indeed, I don't think it is an exaggeration to say that these rates often approach the rates expected by loansharks! The credit card companies and banks lobbied very hard for passage of this legislation. The reason now appears clear: as the economy proceeds into the downturn, capital and the state have sent the clear message to working class families that they will have to pay their debts. Thus, while firms will be able to declare bankruptcy and reorganize afterwards debt free, workers will be expected to pay off their credit card debt no matter how long it takes. Indeed, many workers will have to work for many years to come for no other reason than than that they have to pay-off a financial debt. Does this mean that there will be a new segment of the working class in the US who will become basically indentured servants? Thus, in looking at indebtedness, I think we have to ask not only what the total level of indebtedness is, but also: * what classes are indebted to whom? * for each category that is indebted, what options existed for getting out of debt? * what is the role of the state in the above? It is interesting to note that my last post concerned working class savings. This post concerns the credit card debt of the working class -- i.e. working class *negative* savings. In solidarity, Jerry > The truly outstanding thing about this boom, > from my Minskian perspective, is the level of > debt which accompanies it. Even if you focus > only on private/non-financial corporation debt > (i.e., personal and corporates), the debt to > GDP ratio now exceeds 145%. That is its > highest level in history--the 1929 ratio, for > comparison's sake, was estimated by Irving > Fisher at 60%. > This implies that when the asset bubbles finally > burst (I say plural because there is an important > bubble in real estate, which is arguably feeding > the stock market bubble), many people will find > themselves with unsustainable debt levels-- > especially if they are thrown out of work as a > result of the crisis, and completely lose their cash > flow. But even those who stay employed may > well find themselves unable to finance debt > commitments, or managing to pay the mortgage > but watching their equity fall as their houses lose > value faster than they repay their debts.
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