[PEN-L:30306] RE: debt

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L:30304] debt

>Several economists and stock market analysts have fretted in recent weeks about
debt levels and the ability of consumers and businesses to meet their
obligations. A surge in defaults could have drastic effects on the economy and
stocks, they say, and even relatively small gains in debt loads can crimp new
spending, which would damage the still-fragile economic recovery.

>Others, however, note that debt as a percentage of net worth, while rising, is
generally below peak levels of a decade ago. They say the situation, while not
ideal, is manageable.<

what's key is private-sector debt (since the US Federal government isn't likely to go bankrupt) and not the ratio of debt to net worth but the ratio of debt service payments to disposable income or cash flow. In my experience, if the latter rises, bankruptcies also rise. (Many worthy folks and companies with nice balance sheets go broke due to cash flow problems.) Doug, do you have stats?

------------------------
Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine