Student Loans have reached US$1.3T. Back in 2007, subprime mortgage reached US$1.3T as well.
The difference between the two? Subprime mortgage is backed by real estate as a collateral, but student loan? It is not backed by anything at all, save the US government guarantee. Lately the number of delinquencies have risen past the 10% level. Eventually it will require yet another government bailout.
Meanwhile used cars value has been collapsing which prompted a number of auto financing companies to warn of impending fall in earnings. By the way, auto loans too have moved past the US$1.0T mark.
It just need a sequence of events, one after the other before the house of cards built on endless supply of debt will fall and fall hard.
In the most recent research, it now takes US$4 of debt to grow the economy by US$1. How crazy is that?
The difference between the two? Subprime mortgage is backed by real estate as a collateral, but student loan? It is not backed by anything at all, save the US government guarantee. Lately the number of delinquencies have risen past the 10% level. Eventually it will require yet another government bailout.
Meanwhile used cars value has been collapsing which prompted a number of auto financing companies to warn of impending fall in earnings. By the way, auto loans too have moved past the US$1.0T mark.
It just need a sequence of events, one after the other before the house of cards built on endless supply of debt will fall and fall hard.
In the most recent research, it now takes US$4 of debt to grow the economy by US$1. How crazy is that?
No comments:
Post a Comment