Debt in the U.S.



Larry Edelson examines the Federal debt in the U.S. Mr. Edelson discusses how household debt is at record levels.

The Chairman of the Federal Reserve and a collection of Wall Street economists want the public to believe that the economy is okay. The Secretary of the Treasury tells that the "economy may avoid a recession."

However, according to the Federal Reserve's Flow of Funds accounts for the first quarter of 2008:

- Household net worth contracted at a rate of 2.9%, the second consecutive quarterly decline. And since peaking in the third quarter of 2007, Americans' net worth has plunged by $2.23 trillion as of March 3, 2008. This figure does not include the declines in real estate since then, or the $1.4 trillion loss of wealth in the stock market declines.

- The frequency and severity of declining household net worth is getting worse. Between 1952 and 1999, U.S. household net worth shrank two consecutive quarters in a row on only one occasion, the 1974 recession. But since 2000, there have been three consecutive two quarter declines, and each of those has involved losses far worse than that seen in 1974.

- Homeowner's equity has plunged to a record low. Moreover, at 46.2% of home value, it's now nearly half the level is was at its peak of 81.5% in 1950.

- Household debt is at record levels when compared to household assets. The average American household now has $19.70 of debt for every $100 in total assets. That may not seem like a high number, but at $13.9 trillion, total outstanding household debt now almost equals the country's entire GDP of $14.2 trillion. All told, at the end of 2007, the average U.S. household owes $119,173 for mortgages, credit cards, car loans, and all other debt. Meanwhile, the average personal savings rate is a mere 0.4%.

Meanwhile, the total federal debt stands at about $9,479,447,411,795. What's more, the debt has been rising $1.67 billion every day since September 2007. This is a disaster, especially considering that Washington's contingent liabilities are not reflected in these figures. Add all of that up and the Federal debt is more than $57 trillion.

"Over time, any economy that's based on a paper currency will see its medium of exchange depreciate and its economy lean toward hyperinflation. In short, Washington will continue to print lots of money, which devalues the U.S. dollar. That creates inflation, which then reduces the size of debts relative to the nominal value of assets. The policymakers also believe it's easier to pay off old debts with a cheaper currency. And that would be true for a small fraction of the population whose incomes are able to outpace the increases you'll see in inflation," Edelson states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspxA-Sorry-State-of-Affairs-1948

About Larry Edelson and Money and Markets

With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research's customers to prudent investments in the sector. His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors.

Mr. Edelson is also a regular contributor to the daily e-letter, Money and Markets. Recognized as an expert in precious metals and natural resources, he is often called upon by the media for his investing views. Mr. Edelson has been featured on Bloomberg, Reuters, and CNBC as well as The New York Times, New York Sun, and Marketwatch.com

Mr. Edelson holds a B.A. degree from Columbia University.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.





Debt in the U.S.