Juggling Dynamite

One of the most useful strategies for rebuilding financial strength and savings in households is the choice to avoid or pay down debt while renting and taking public transit. Turn key rentals and a bus pass are increasingly being chosen over a mortgage, property upkeep and a car loan/lease. Perhaps forced by necessity, but this is a rational, secular shift in both younger and older under-saved people who are facing the realities of income stagnation and over-priced housing costs.

A behavioral change to more frugal habits and less spending is part of the critical rebuilding of household wealth which is so needed for future stability. It also means less demand and sales today. Now that ‘financial engineering’ gimmicks have run their reckless course, it is time for self-discipline, and fiscal restraint to come back into vogue. What is good for people and families will be bad for financial firms and companies banking on levered sales. But then they had their glory days getting the world into the present mess. Payback time is long overdue.

U.S. home ownership is at its lowest level since the start of 1995. Here is a direct video link.

Jim Chanos, of Kynikos Associates, discusses evidence of ‘Ponzi’ finance now coming apart in China as well as unwinding effects in the commodities sector. Here is a direct video link.

Doubts over China’s unexpectedly strong trade figures are mounting after Hong Kong reported its imports from the mainland. The numbers are far less than what China announced a few weeks back. Here is a direct video link.

The Chinese growth ‘miracle’ has come back down to earth weighed by the debt left from ‘stimulus’ efforts. See: The journey from luxury to thrift will test Beijing’s metal

“Total debts owed by the government, companies and households have ballooned to 240 per cent of gross domestic product, virtually double the level at the time of the global financial crisis…This year China is set to pay an interest bill of about $1.7tn, an amount not far short of India’s entire GDP last year ($1.87tn) but larger than the economies of South Korea, Mexico and Indonesia…

One answer to the question of why Beijing has fallen so rapidly into hock is that it had little choice but to do so; the liabilities represent the costs incurred from responding to the global crisis. The collapse of US demand in 2008 hammered China’s export sector, throwing roughly 30m people out of work in a matter of months and obliging Beijing to launch a stimulus programme that drew impetus from the ambitions of local governments to demonstrate their manifest destiny.”