Most Americans Hanging on By a Financial Thread

[Chomsky]

You can forget any "recovery" until this situation gets markedly better.

http://www.housingwire.com/2009/03/1...-thread-study/

Want a stunning figure? Half of Americans now say they are only one month or less away from not being able to meet their financial obligations if they were to lose their job — just two paychecks or less. And of these, more than half — 28 percent of all Americans — say they could not survive financially for more than two weeks without their current job.

...

The survey data underscores that the mortgage industry would do well to remain focused on economic fundamentals: following a job loss, 59 percent of survey respondents said they’d be somewhat or very concerned about having to file for bankruptcy, and 64 percent would be concerned about losing their home.

And evidence of the spending binge most Americans are still recovering from is evident in even the broadest sense, not just limited to those with more limited financial means. Even the “mass affluent” — those making $100,000+ in income per year, according to the MetLife study — haven’t been saving enough, with more than one-quarter (29 percent) saying that they couldn’t meet their financial obligations for more than one month following a job loss.

That’s the sort of information that should give every lender, investor and servicer pause as we think about managing a growing number of bad loans.

[Penguin]

Re: Most Americans Hanging on By a Financial Thread

I can believe every word of it.

Matter of fact there was a guy in my office yesterday telling me that one paycheck missed would put him under. He is literally a layoff or injury away from immediately going into crisis mode. I have had others here at work tell me the same thing.

But here's the kicker: we make very good money here. For the time and place it is damned good. Cost of living is very affordable. You can buy a house in this town for about what you can rent. Both of which aren't unreasonable.

OTOH, you can get a lot of these guys into a good conversation about what they did the past weekend and the topics will end up covering boats, and Harleys, and 4 wheelers, new pick up trucks, and many have built new houses. Very expensive new houses. Trips to the beach are pretty common. Many of them own or have time shares in a place down there.

So judging from my own limited experience I'd have to say yes, there are many people a paycheck away from losing it all.

I say this without condescension. It is not any personal ethical high achievement on my part that I am not in this condition. It was having a very responsible mother who taught me how to run a household prudently. And maybe moreso absorbing those lessons while growing up in the appalachian (app-uh-latch-en if you don't mind ) coalfields during the coal collapse of the 80s.

Which brings me to a question: How many kids growing up today will see debt as a noose and living above your means as a vice simply by seeing the hardships of their parents?

Take care,
Will

[sn1p3r]

Re: Most Americans Hanging on By a Financial Thread

I think it's interesting to think that our grandparents losing it all usually meant farms/land/etc and now it means jet skis/boats/harleys...

...even worse when hard times do hit everyone will have the same junk to trade and nothing else. :confused:

[jpatter666]

Re: Most Americans Hanging on By a Financial Thread

Isn't there some Chinese saying that wealth only lasts three generations?

Our grandparents built it after the Depression and now their grandchildren are on the verge of losing it all.

[karim0028]

Re: Most Americans Hanging on By a Financial Thread

This article is about a year behind (for me anyway)... i kind of figured this out about a year ago by doing an informal survey where i work (a rather large tech company); just asked colleagues at work how they felt about the economy and i had several people practically going off the deep end that their HELOC had been either frozen or closed... The mantra was "i cant afford to lose my job".... They really looked like they were sweating bullets. Now these are people that have themselves and their spouses working at our company and make upwards of close to 100K/yr each, so most likely an ~ 200K household....

I was not very surprised.... Then i started hearing discussions about those high earners contemplating letting their houses go to foreclosure and then i knew we were really fucked.... I kind of put 2+2 together and figured out that this wasnt just a poor mans problem or a subprime problem; this was widespread and all around; all while the retarded MSM was telling the sheeple that it was time to get back into the housing market before prices "rebound"....

[Munger]

Re: Most Americans Hanging on By a Financial Thread

Isn't there some Chinese saying that wealth only lasts three generations?

Our grandparents built it after the Depression and now their grandchildren are on the verge of losing it all.

Apocryphally, Andrew Carnegie is attributed: "Shirt sleeves to shirt sleeves in three generations."

[mikedev10]

Re: Most Americans Hanging on By a Financial Thread

i'm 29, not surprised. couple years ago i knew plenty of peers saving nothing while making good money. we've never seen a real rainy day so why would you expect us to have saved for one?

[Truefire]

Re: Most Americans Hanging on By a Financial Thread

Apocryphally, Andrew Carnegie is attributed: "Shirt sleeves to shirt sleeves in three generations."

I'm 43, haven't seen it all by any stretch. Seen enough though. I remember the gas lines of the 70's. NYC was a spiralling down. The south Bronx was freakin Beruit. Brownsville & Bed Stuy brooklyn were war zones. I would sign up right now for that.

Red Fox said it best " This is the big one Elizabeth".

We're too soft, most

[tombat1913]

Re: Most Americans Hanging on By a Financial Thread

i'm 29, not surprised. couple years ago i knew plenty of peers saving nothing while making good money. we've never seen a real rainy day so why would you expect us to have saved for one?

Because a reasonable person can see that change is eminent.

[hayekvindicated]

Re: Most Americans Hanging on By a Financial Thread

Britain is the same I would guess if not a whole lot worse. There must be a lot of stories of financial busts in the City of London where people lived it up in style on borrowed money on the assumption that the party must go on forever.

[hayekvindicated]

Re: Most Americans Hanging on By a Financial Thread

We are likely to see draconian measures in Britain and America against those who were prudent (not those who are rich, but just prudent, i.e. those who are still worth something and aren't up to their eyeballs in debt).

There will be a lot of envy and resentment among the people which the politicians will feed merrily.

I would regard the following as a certainty:

(1) much higher taxes;
(2) some form of wealth tax which squeezes those who are still solvent;
(3) massive inflation to inflate the debt away;
(4) price controls on essential items because of (4). The "evil speculators" and "evil hoarders" will get the blame (not the central bankers obviously).

[drumminj]

Re: Most Americans Hanging on By a Financial Thread

i'm 29, not surprised. couple years ago i knew plenty of peers saving nothing while making good money. we've never seen a real rainy day so why would you expect us to have saved for one?

As one who is 30, I would agree. I'm "lucky" to have stumbled upon such "doom and gloomer" forums such as iTulip (note that I mean that playfully). By my friends and peers I'm still seen as quite the pessimist, even if I simply suggest taking prudent measures for insurance - having some cash at home in the event of a bank holiday/power loss (thus no ATM access or credit card machines working)/natural disaster. Or making it a priority to have six months' living expenses saved up in case of a prolonged unemployment. Or having some extra food around in case there's some interruption in the supply chain.

It seems many our age have gotten lulled into feeling that such things don't happen anymore - we've evolved beyond it - and thus it'd be crazy to take precautions for such an event. Even if you point out recent events where such measures would have made a huge difference - ie Hurricane Katrina aftermath - it still doesn't sink in that things aren't always going to be sunshine and rainbows...

[touchring]

Re: Most Americans Hanging on By a Financial Thread

There's a solution, find an English teaching job in a small city in China. The pay is low, but the living expenses are low as well. After 3 years, you may learn some chinese, the recession is over, and you can return to the US with additional chinese skills.

[karim0028]

Re: Most Americans Hanging on By a Financial Thread

ABy my friends and peers I'm still seen as quite the pessimist, even if I simply suggest taking prudent measures for insurance

Yup, i am seen as a doomer and a pessimist as well... Even though im really not, its just like "dude, if you see a storm coming, its time to batten the hatches"....

[FRED]

Re: Most Americans Hanging on By a Financial Thread

This article is about a year behind (for me anyway)... i kind of figured this out about a year ago by doing an informal survey where i work (a rather large tech company); just asked colleagues at work how they felt about the economy and i had several people practically going off the deep end that their HELOC had been either frozen or closed... The mantra was "i cant afford to lose my job".... They really looked like they were sweating bullets. Now these are people that have themselves and their spouses working at our company and make upwards of close to 100K/yr each, so most likely an ~ 200K household....

I was not very surprised.... Then i started hearing discussions about those high earners contemplating letting their houses go to foreclosure and then i knew we were really fucked.... I kind of put 2+2 together and figured out that this wasnt just a poor mans problem or a subprime problem; this was widespread and all around; all while the retarded MSM was telling the sheeple that it was time to get back into the housing market before prices "rebound"....

Yes, the article is about a year late. See: Dual Cycles of Demand Destruction and the Economic Face Plant, April 2008.

How long can the median US household hold out in this recession? Ready for this? The median US household if deprived of credit due to tighter lending and income due to job loss has enough savings to finance 18 days of cash flow, down from 30 days in 2001.

Eighteen days of liquidity based on median household cash flow