[PEN-L:6747] Re: Competitiveness

[dhenwood@xxxxxxxxx (Doug Henwood)]

At 2:18 PM 10/17/96, Tavis Barr wrote:

>So do you have any idea what a default level is?  International banks
>seem to regard anything above a 100% debt/GNP ratio as risky; is it
>similar for consumers?  Are defaults up?  Are the indicators of defaults
>well known?  Are they worth an academic study?

Well, like I think I said, personal bankruptcies (as a percentage of
population) set a record in the first quarter of this year; don't know if
that's continued into the second.

Debt service, according to unofficial Fed estimates, took 16.9% of DPI in
96Q2, not all that much below the record of 17.6% in 99Q4, and well up from
the recent low of 15.3% in 93Q4. Remember all the early 90s talk of a new
prudence about debt?

I'm sure the indicators of default are well known. Obviously the aggregate
data can't tell you about the debtor at the 90th percentile, the one who's
likely to go broke. I'll bet when the mean is rising, the 90th percentile
is rising faster. If you want to play with some numbers, I'll think at
least some of the authors of As We Forgive Our Debtors: Bankruptcy and
Consumer Credit in America (New York: Oxford University Press) - Teresa A.
Sulliavan, Elizabeth Warren, and Jay Lawrence Westbrook - have a good
database on debt & insolvency.

Doug

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