15x More Debt

9 Mar

From the Sydney Morning Herald:

Australians now owe financial institutions more than $1 trillion in housing mortgages, almost 15 times as much as 20 years ago, new Reserve Bank figures show.

The Reserve revealed that people paying off their own homes now owe banks and other lenders $763 billion – almost 12 times more than the $65 billion owed in January 1990, when figures were first compiled.

Rental investors have increased their mortgage debt even more spectacularly. In January 1990, landlords owed banks $10.5 billion, but by January this year, the figure had swollen more than 30 times over, to $324 billion.

Household disposable income also rose in that period, but it only trebled. In January 1990, home mortgages ate up just 28 per cent of our disposable income. By January 2000, that had ballooned to 66 per cent, and by January this year, it doubled again to 134 per cent.

Even in the past year, despite the global financial crisis, the debt we owe on home mortgages climbed relentlessly, up $83.5 billion to $1087 billion.

Households’ willingness to take on greater debt powered much of Australia’s economic growth from 1990-2010 but with our households now as indebted as any in the Western world, economists say that will not be repeated.

This is a perfect illustration of how the Reserve Bank of Australia has indebted the nation by its inflationary policies, that have made our currency lose 968.1% of its buying power.

By creating ever more money (as debt, or ‘credit’ loaned to home buyers and consumers), the prices for everything are silently, relentlessly pushed ever higher.

But our wages never rise enough to match. So, we are driven ever more deeply into debt.

Now that Rudd Labor has so rapidly indebted the Federal government as well, we are in huge financial danger.  There is simply no ‘capacity’ for households, or the government, to keep on spending and support the economy when another crisis strikes.

Thanks to too much debt, the only way forward is… even more debt. And we all know what happens when you reach a point where your debt is so great that you cannot pay it back.

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