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Our debt mountain

Here is what individuals, corporations, local, state and federal government are faced with…

Mountains of debt that accumulated over the years…

$50 trillion of combined debt…

Particularly the debt of financial companies… from the New York Times’ Floyd Norris

~~~~”…For most of the last two decades, the biggest increase in debt in America came from financial companies. Much of that debt came from financial innovation rather than actual economic activity.

Once, a homeowner took out a mortgage, and household debt increased. But by early this decade, the mortgage could be used to secure a mortgage-backed security, and the mortgage-backed security could be used to secure a collateralized debt obligation. Those last two loans counted as financial obligations. There was no more real economic activity, but there was a lot more borrowing.

In some cases, the newly created financial debt was guaranteed only by the underlying assets — like the home mortgage. But other financial borrowing became the equivalent of government debt, at least as seen by the lenders. That was because the money was either borrowed by government-sponsored enterprises like Fannie Mae, or guaranteed by them or by government agencies.

Such debts rose at a 10.2 percent rate over the last two decades. Debt issued by financial companies without such guarantees rose even faster, at a 10.6 percent rate. By contrast, the debt of nonfinancial businesses climbed at a rate of 5.9 percent….”~~~~

We are faced with significant liabilities to work off… it is foolhardy to imagine that the federal government can borrow it’s way out of this hole… big choices will have to be made… new approaches conceived … challenging times ahead…