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Dealing with ‘excessive’ Debt…one Option! Let’s explore!

June 8, 2014

The Obama administration is now proposing to extent the 10% rule for all student debt. This rule allows students with college debt to pay off their debt over an extended time period by paying only 10% of their income for payments. This means that the lender must accept a lower payment while students income is restricted. Let’s think about a similar rule for all consumer and mortgage debt. In fact, this type of rule could be proposed for all our corporate, national, state, and local debt as well. Let the LENDER assume a lower return while borrowers experience lower incomes. Could this strategy be proposed to all lenders? Would China, Japan, Germany, and our other creditors accept this type of strategy for our national DEBT? Our Fed could mandate this type of rule for lenders who are members of the Federal Reserve System. Also, our Fed now owns most of our current mortgage debt in the USA (some 90%) so this type of rule could be installed now for the Fed’s holdings. What do you think?

The student loan delinquency rate may be much higher than previously estimated, according to a report by the Federal Reserve Bank of New York (FRBNY). The report estimates that the delinquency rate is not a previously estimated 10 percent, but actually 21 percent. Others place the delinquency rate at 27%. 

 

Obama’s loan forgiveness program was introduced on March 8th, 2012. The loan forgiveness act caps payments at 10% of the borrower’s income, so no matter how much a person is earning, the repayment will not be more than 10% of what he or she earns. The plan provides forgiveness for ten years in the event of economic hardship.

Could our DEBT be extended by allowing debtors to pay a lower % of their monthly income in lieu of the normal amortized payment plus interest? What do you think? Is something better than nothing?

 

Lenders could assume lower payments as long as Household Debt remains above (say 10%) of disposable income!

In 2001 total credit market debt was up to $28 trillion.  Today it is now well above $53 trillion and inching closer to slapping on another trillion dollars this year.  If you look at Greece as a microcosm of the bigger issue, you realize they are treating a solvency issue as if it were a liquidity issue.  Let us be absolutely clear that all of this debt will never be paid off.  This warrants repeating:

“The $53 trillion in total credit market debt will never be fully repaid.”

Our financial problem is mostly excessive DEBT. How could this mountain of debt be dealt with for consumers?

The US is slowly becoming a McJob nation. While the press jumps up and down that the US is now finally at a breakeven point from the jobs lost since the recession started in 2007, they fail to mention that those not in the labor force is up by nearly 13 million. Even looking into the recent employment report, we continue to find a heavy trend of hiring in low wage employment sectors. For example, 32,000 jobs were added in “leisure and hospitality” bringing the annual total of jobs added to 311,000. Another 21,000 jobs were added in social assistance which pay very little but will grow as demand for health support grows by an aging population. The system at least in the eyes of Wall Street and the government is working perfectly fine. We have a plentiful supply of low wage labor while laws and bailout mechanisms are in place for the financially and politically connected. The middle class continues to fall off the bandwagon one by one and enters a labor force of permanent low wage labor with very little prospect of a decent retirement. In fact, most will be working until all the wheels come flying off. We also find that 1 out of 4 Americans are working in jobs that pay $10 or less per hour. How about trying to earn the Americans Dream on that McJob salary?

Why not propose a minimum % of GNP as payment to our Creditors? The debt party could continue for a while longer! Actual National Debt is currently approximately $17.5 trillion and growing! 

We have a spending, revenue, and financial system problem in the way incentives are structured. For example, all talk of the Fed tapering is really just hollow rhetoric. The Fed now has a balance sheet well into the $4 trillion range (or twice the size of California’s annual GDP). There is no sign of pulling back. U.S. debt is NOW at $17.5 + trillion and growing as we spend more than we take in. People do realize that this principle is never going to be paid back right? Do Americans understand our situation? Probably not!

Fed’s Reserve Bank credit 4,284,873 +      255 +  935,079 4,288,107
Fed’s Securities held outright1 4,067,250 +    1,063 +  940,348 4,070,251
Fed’s U.S. Treasury securities 2,375,185 +    6,669 +  484,148 2,378,186
Bills2          0          0          0          0
Notes and bonds, nominal2 2,263,829 +    6,542 +  467,071 2,266,790
Notes and bonds, inflation-indexed2     96,068          0 +   14,422     96,068
Inflation compensation3     15,288 +      127 +    2,655     15,328
Federal agency debt securities2     44,082          0 –   26,808     44,082
Fed’s Mortgage-backed securities4 1,647,983 –    5,606 +  483,008 1,647,983

(adjust above numbers x 1,000,000)

Our Fed now owns $1,647,983 in mortgage debt (that is $1.65 trillion after adjustment). Why not reduce the monthly mortgage payments for our American borrowers as Fed income from these mortgages is actually fraudulent? The Fed does not need this interest income as it creates our Cyber Money ‘out of nothing’ and then collects ‘interest’ on their Asset Purchases. Our Congress does not appropriate any funds for the Fed’s operations. Think about this Ponzi scheme of our Fed! Let’s propose that our Fed create new dollars (now Cyber units) to pay for ALL our taxes and any mortgage debt which they acquire! The Fed’s QE policy (2208 – 2014) has created the huge balance sheet of our Fed (now over $4 trillion). Why should Americans pay any taxes or mortgage payments to this unconstitutional entity? Let the Fed pay for our taxes and our mortgage payments! Think about this concept! I am: https://kingdomecon.wordpress.com

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