Investors often find it incredibly difficult to stomach the ability of their assets to rapidly reduce in value whilst the debt required to buy them in the first place continues to take a long time to reduce.
Just recently this unpalatable financial reality was witnessed again in a report compiled by the Federal Reserve Bank of New York. This regional Reserve Bank acting alongside the Board of Governors in Washington D.C. created the first of a series of quarterly 30 or so page publications focussed on household credit and debt. This 38 page laid out the bare facts indicating the as a nation the U.S. consumer remains in a very weak position now more than three years after the recession started.
Debt elimination for most has been very slow and painful, albeit people have made positive, strong efforts towards reducing the money owed to their creditors.
As an example, during 30th June total consumer debts amounted to $11.7 trillion, only 6.5% below a peak in the third quarter of 2008. Open credit card accounts had become much reduced, by 23.2%, from the all time highs witnessed during 2008’s second quarter. Mortgage rates also fell during this time, by 6.4% from what was a peak just under two years ago.
Despite people cutting back heavily, consumers are still very much in the vice-like hold of this recession. In 2010, by around June 11.4% of outstanding consumer debt was seen to be delinquent, $986 billion of which was considered at serious levels of debt – still having not been paid at 90 days and counting. Although balances are down by roughly 3% with regard to delinquencies from the same period last year, delinquencies that were serious rose a little by 3.1%.
Yet more worrying statistics could be found from the ‘Fed’. The period between 31st March to 30th June saw half a million people with foreclosure having been added to their credit reports. This amounted to an increase of 8.7% over 2010’s first quarter. Consumer bankruptcies also rose in this first quarter by 34% to 621,000. From what the Fed recorded over the last few years bankruptcies had taken a significant rise.
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