Home
In this issue
April 21, 2014

Andrew Silow-Carroll: Passoverkill? Suggestions to make next year's seders even more culturally sensitive

Sara Israelsen Hartley: Seeking the Divine: An ancient connection in a new context

Christine M. Flowers: Priest's execution in Syria should be call to action

Courtnie Erickson: How to help kids accept the poor decisions of others

Lizette Borreli: A Glass Of Milk A Day Keeps Knee Arthritis At Bay

Lizette Borreli: 5 Health Conditions Your Breath Knows Before You Do

The Kosher Gourmet by Betty Rosbottom Coconut Walnut Bars' golden brown morsels are a beautifully balanced delectable delight

April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Sept. 18, 2013 / 15 Tishrei, 5774

Deleveraging report card: How countries handle the burden of debt

By Robert J. Samuelson




http://www.JewishWorldReview.com | Almost everyone agrees that too much borrowing (a.k.a. “leverage”) was at the core of the financial crisis and Great Recession. Too many risky loans were made. Where do we stand five years after Lehman Brothers? Well, there’s good news and bad. The good is that U.S. households and businesses have cut their debt burdens. The bad news is that in most other countries, they haven’t.

The economic implications are plain. If you’re devoting more of your income to debt repayment, you’re probably spending less at the mall. On paper, Americans’ lighter debt burdens suggest a stronger economy. By the same logic, steep debt levels elsewhere may retard the worldwide recovery.

Let’s go to the numbers. These come from the McKinsey Global Institute — the research arm of the consulting firm — which has been tracking debt in major economies. To measure the relative burden of debts, McKinsey compares them to the country’s economy, its gross domestic product (GDP). Here are McKinsey’s latest findings for the United States.

Start with households, whose debts consist mostly of home mortgages, credit card loans, and auto and student debt. From year-end 2000 to 2007, household debt almost doubled, from $7 trillion to $13.7 trillion. As a share of GDP, it went from 69 percent to 96 percent. That was the credit bubble inflating. But since 2007, household debt has dropped by nearly $1 trillion to $12.8 trillion. The GDP share has fallen to 80 percent. This was the bubble popping: mortgages defaulting and being written off; or borrowers skimping on spending to repay debts.

Something similar has happened to non-financial businesses — companies such as IBM, Google and Wal-Mart. True, their debt rose from nearly $11 trillion (77 percent of GDP) in 2007 to $12.9 trillion (81 percent of GDP) in 2013. But these figures overlook the reality that much corporate debt has been refinanced at lower interest rates. As a result, says economist Susan Lund of McKinsey, annual corporate interest payments dropped by nearly $200 billion from 2007 to 2012, from $551 billion to $369 billion. Lower debt and interest rates did the same for households, whose interest payments also fell about $200 billion from 2007 to 2012.


These developments are a plus for the U.S. economy. Consumers are better positioned to spend, and — if demand strengthens — businesses are better positioned to invest in new production capacity.

Abroad, the picture is darker. True, private debt in some countries is low or declining. Germany’s household debt fell from 73 percent of GDP in 2000 to 58 percent in 2012. Indeed, some economists argue these low debt levels show that Germany’s economy depends too heavily on exports and not enough on domestic demand. But Germany is an exception. Many countries have high private debt levels. In Britain, both household and business debts are near 100 percent of GDP. In Canada, household debt is 96 percent of GDP; in Australia, it’s 106 percent of GDP. Both these countries, says Lund, might suffer housing bubbles with prices collapsing and defaults increasing. This is already happening in the Netherlands, she says, where household debt reached 125 percent of GDP.

Together, what do these numbers mean for the world economy? Bear in mind three realities.

First, there’s no magic debt level — compared to GDP — that’s just right or too much. The amounts may vary by country. Nations with faster growth can usually bear more debt, which can be repaid from rising incomes. Still, the higher debt goes, the more likely it will reach a tipping point that triggers a broad credit pullback (and higher interest rates) or a full-fledged crisis.

Second, just because U.S. private debt levels have dropped doesn’t mean that American consumers and businesses will go on a spending spree. Shaken by the Great Recession, they may reduce debt further or increase savings against future setbacks.

Third, government debt has expanded in most countries. In some, it substituted for contracting private debt. In the United States, government debt (including state and local borrowing) rose from 56 percent of GDP in 2007 to 93 percent in 2013. In Japan, government debt in 2012 was 228 percent of GDP. In Britain, it was 95 percent. So far, financial markets have accepted these high levels without imposing punishing interest rate increases. But despite the talk of too much “austerity,” countries will want to restrain large debt increases for fear of a market backlash. The resulting higher taxes or lower spending could dampen growth.

So any deleveraging report card must be maddeningly hedged. An honest grade is: incomplete.

What explains their lapse? Probably this: Before the real estate collapse, there was a widespread belief that housing prices would rise indefinitely, preventing (by definition) a bubble. We now know this belief was mistaken, stupid and suicidal. But for many, it was genuine. An earlier study by economists at the Boston Federal Reserve reached a similar conclusion.

All this is more than ancient history. It matters for two reasons.

One is to understand today’s economy. Because Americans over-borrowed, it’s suggested that when they’ve adequately repaid debt (“deleveraged”), the economy will improve. Well, they’ve deleveraged considerably. Debt payments as a share of disposable income are at their lowest levels since the early 1980s, according to the Federal Reserve Board. Still, the economy barely limps along. The problem transcends debt. The disillusion with the pre-crisis euphoria has led to an opposite post-crisis reaction. Yesterday’s foolish optimism has become today’s protective pessimism. A Pew survey finds 63 percent of Americans feel “no more secure” than five years ago.

People once thought the future was more stable and more predictable; now they fear it’s less stable and less predictable. Their behavior becomes more precautionary. For consumers and companies, there’s a greater bias against spending, lending, hiring and taking economic risks of any kind. The economy, though not crippled, isn’t invigorated either. With changed behavior, economic models based on past patterns frequently over-predict growth.

The second reason to reexamine the crisis involves policy. The “scoundrel” theory of causation suggests that, once defects in the economic system are identified, they can be rectified with “reforms.” The Dodd-Frank financial legislation reflects this philosophy. The true history of the crisis raises a larger problem. Success in stabilizing the economy in the short run fostered greater long-run instability. What are the limits to stabilization policy? Might more short-term upsets minimize long-term calamities? Economists should be wrestling with these and other hard questions. They aren’t.

<

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

Comment on Robert J. Samuelson's column by clicking here.



09/16/13: The stability bubble: We still aren't asking the right questions
09/12/13: Why minimum wage isn't a shortcut to social justice
09/09/13: Making a lackluster economy self-fulfilling
09/05/13: The 'war weary' myth
08/29/13: Instead of fixing 'economic disparities', the administration's moves have killed off what was left of the post-WWII jobs compact
08/29/13: Pop goes the emerging-market bubble
08/26/13: Why Obama's delaying Fed pick is continuing to damage America
08/22/13: Revealed! The one fact the administration doesn't want you to know about the economy's stubborn sluggishness
08/19/13: From bubble to bottleneck: The unintended side effects of other government policies
08/15/13: A better, brighter America? We're defining prosperity down
08/12/13: The news isn't free
08/08/13: ObamaCare has already caused health care cost growth to slow?
08/25/11: Inflation is the answer?
08/09/11: The big danger is Europe
07/27/11: Why are we in this debt fix? It's the elderly, stupid
07/25/11: Postwar Pillars Of Capitalism Are Crumbling
01/27/11: How Obama's speech muddied the budget debate
01/24/11: China's new world order demands stronger U.S. response
10/18/10: What's left in the Fed's toolbox?
10/11/10: The Age of Austerity
09/20/10: The ritual of sound-bite economics
08/09/10: America's parent trap
08/02/10: Hope for our energy future
07/29/10: Why CEOs aren't hiring
06/07/10: Duped by success
05/31/10: Why Obama's poverty rate measure misleads
05/17/10: Wake up, America
03/22/10: The maestro's misconceptions
03/15/10: Obama's illusions of cost-control
01/14/10: In the aftermath of the Great Recession
12/29/09: Democracy's demolition derby
11/30/09: Bipartisan threats against the institution that saved America from depression
09/14/09: Give It to Us Straight
09/07/09: Bad Future for Jobs?
08/24/09: A Rail Boondoggle, Moving at High
08/10/09: Championing the Status Quo
08/03/09: We'll remain in denial, prisoners of wishful thinking, until the fateful reckoning arrives in the unimagined future
07/27/09: Obama's misleading medicine
07/13/09: Americans' self-indulgence hurts us
07/06/09: Economists out to lunch
06/29/09: Panics ‘R’ Us!
06/08/09: Flirting with deflation or inflation? Now the economy might be at risk of both
05/25/09: A ‘crisis’ America needs
05/18/09: Will somebody finally say that Obama is irresponsibly mortgaging our future?
05/04/09: The Bias Against Oil And Gas
04/27/09: Environmentalists maximize the dangers of global warming while pretending we can conquer it at virtually no cost
04/20/09: Our Depression Obsession
03/23/09: Geithner treads a line between financial paralysis and populist resentment
03/23/09: American Capitalism Besieged
01/06/09: The limits of pump priming
12/29/08: Humbled By Our Ignorance
07/31/08: The homeownership obsession
07/24/08: A Depression? Hardly
07/17/08: Why isn't globalization making the interconnected world more stable?



© 2009, WPWG

Columnists

Toons

Lifestyles