Posts Tagged ‘borrowing’

“As the Financial Times reported yesterday, more than 1 million U.S. consumers are ‘at least two months behind on car loan repayments,’ noting that the delinquency rate in the $1.1 trillion market hit its highest level since 2009. And that’s not just limited to subprime borrowers. That figure includes everyone with a U.S. car loan….

The financial Times also cites, ‘Delinquencies on credit cards also rose by about the same amount over the period to 1.79% – the highest since 2011. The rise in bad loans comes despite persistently low borrowing costs and unemployment levels – suggesting lenders may be letting consumers take on bigger debt burdens than they can handle.

Lending to consumers with weak credit scores has been one of the fastest-growing parts of the industry. Still, the increased delinquency levels follow a period of rapid expansion and could be a natural consequence of that growth. Separate figures published on Thursday by the New York Federal Reserve showed the total amount of debt held by American households rose last year at the fastest clip since 2007.'” -Porter Stansberry

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“An individual doesn’t enrich himself by borrowing capital.  He can only enrich himself by carefully increasing his utility (his skills), saving his excess production, and investing that capital wisely to further increase his production.” –Porter Stansberry

When J.P. Morgan (the man) was called to testify before Congress about the ‘money trust’ and asked to explain why some firms received credit and some firms didn’t, he famously explained that the first test of any loan was the character of the man borrowing the money.” -Porter Stansberry

“…the world has been binging on debt like never before.

The International Monetary Fund reported last month that total nonfinancial-sector debt has ballooned to an all-time record of $152 trillion… while the global debt-to-GDP ratio has also soared to an all-time high of 225%, up from 200% just 14 years ago.

Worse, we’re seeing record debt at the government level, the corporate level, and the consumer level (via auto and student loans, in particular). The boom in corporate borrowing is especially concerning…

U.S. companies have already borrowed $1.4 trillion this year to date, according to data firm Dealogic. This is on pace to shatter last year’s previous all-time record of $1.5 trillion.

Unfortunately, most are using this money to refinance existing loans… buy back stock and pay dividends… and finance expensive (and often questionable) mergers and acquisitions. This will do little to help the economy. But it greatly increases leverage… and risk.” -Justin Brill

Yes…times have rarely been better for bankers.  In total, household borrowing has climbed back to $12.1 trillion − the highest level in five years − with balances growing across the credit spectrum once again, including mortgages and credit cards.  Happy days….  Our bankers have been world-class in providing more capital than ever before for corporations and consumers.  They’re doing a splendid job.  Don’t hate the bankers.  They only did what the government told them to do.  Besides… it’s not their money.  It’s yours.” -Porter Stansberry

For the first time ever, Americans collectively hold more auto loans than mortgages.  Who is borrowing all of this money? Anyone who can fog a mirror…. 40% of all car loans being made this year are to subprime borrowers.  These loans typically have interest rates as high as 20% annually.


What kind of a person borrows money at 20% annually for more than five years to pay for a used car?  Someone who has no incentive to repay the loan.  Calling that deal a “loan” is a misnomer.  It’s a lease with zero residual value.  The borrower will never have any equity – nothing is at stake for him.  He doesn’t even have to return the car… they’ll send a tow truck.” -Porter Stansberry

“Politicians ensure reelection by giving away things that don’t belong to them….  But political redemption is based mostly on amnesia and debt….  And heavy borrowing allows them to push the cost onto people with no memories at all – many of whom aren’t even born yet.  By the time the bills come payable, most people have forgotten who contracted them or what they were for.” -Bill Bonner