The Kenyan Socialist anti-Christ does it again...

[Kidlicious]

Yes then...given the bolded limitations it seems we are actually saying the same thing. Although "economic collapse" is too absolute a term to describe what businesses are looking at, I can accept the general premise.

Consumer balance sheets are improving, no?

[PLATO]

Consumer balance sheets are improving, no?

haha...yes, but not because of a "bettering" of their situations, but as a consequence of lowered access to credit and income sources. Is this a driver of demand? Could be...if we see the confidence boost you are predicting, but business will still see the barriers that still exist and be slow to respond. Fair chance that all we will see is inflationary pressure, but even that could help to lessen some of the barriers. Of course...in the background, there is still the FED and their monetary policy.

[DinoDoc]

Interestingly enough the "government takeovers" of the auto industry actually ended up making the US money. Fun that.

It's projected to have lost the US government billions thus far.

[Kidlicious]

haha...yes, but not because of a "bettering" of their situations, but as a consequence of lowered access to credit and income sources. Is this a driver of demand? Could be...if we see the confidence boost you are predicting, but business will still see the barriers that still exist and be slow to respond. Fair chance that all we will see is inflationary pressure, but even that could help to lessen some of the barriers. Of course...in the background, there is still the FED and their monetary policy.

It doesn't really matter that their balance sheets have improved because of the recent economic environment. That's just saying that the future economic environment will be bad because the past economic environment is bad. If they have an improved balance sheet they have better credit and will get loans.

[PLATO]

It doesn't really matter that their balance sheets have improved because of the recent economic environment. That's just saying that the future economic environment will be bad because the past economic environment is bad. If they have an improved balance sheet they have better credit and will get loans.

No...not at all. Credit deciusions for most consumers are very very rarely based on assets. It is much more based on past performance. A recent bankrupt who can now save money and just got a great job has 0% chance of getting a mortgage loan and will have to pay a high premium for an autoloan or credit card.

Consumer balance sheets are virtually meaningless in consumer credit decisions 95% of the time.

[Kidlicious]

No...not at all. Credit deciusions for most consumers are very very rarely based on assets.

Yeah, but assets can be sold to pay off liabilities.

It is much more based on past performance. A recent bankrupt who can now save money and just got a great job has 0% chance of getting a mortgage loan and will have to pay a high premium for an autoloan or credit card.

That leaves the millions of people who's balance sheets have improved who haven't filed for bankruptcy. It also leaves the people who have filed bankruptcy some years ago, and have improved their credit since.

Consumer balance sheets are virtually meaningless in consumer credit decisions 95% of the time.

So what you are saying is that businesses don't care how much money you already owe when they make the decision to lend to you?

[PLATO]

Yeah, but assets can be sold to pay off liabilities.

True, but not significant unless debt to income is an issue

That leaves the millions of people who's balance sheets have improved who haven't filed for bankruptcy. It also leaves the people who have filed bankruptcy some years ago, and have improved their credit since.

Yes, but this does not create access to limited credit markets in and of itself. Improved credit will help...as well as time.

So what you are saying is that businesses don't care how much money you already owe when they make the decision to lend to you?

Essentially this is correct. It is the ability to service existing debt and the debt being applied for that has much more bearing.

[Kidlicious]

True, but not significant unless debt to income is an issue

It is an issue. Some people have to pay down their debt to buy a house, for example.

That leaves the millions of people who's balance sheets have improved who haven't filed for bankruptcy. It also leaves the people who have filed bankruptcy some years ago, and have improved their credit since.

Yes, but this does not create access to limited credit markets in and of itself. Improved credit will help...as well as time.

Actually it does, for many people. The fact is this, as consumer balance sheets improve more people are qualified for loans. Denying that is silly.

So what you are saying is that businesses don't care how much money you already owe when they make the decision to lend to you?

Essentially this is correct. It is the ability to service existing debt and the debt being applied for that has much more bearing.

In other words, credit score. And many improve their credit score buy paying off their debt, especially in this environment where debt has been so high. So consumers are in control of their own credit score if they have assets, and increasingly they are owning assets.

[Dinner]

Really Mtg? Maybe you can let us know why you think this is happening?

Because corporate earnings are good and cash stockpiles are at record levels. In addition tax rates are low (people like Romney pay 10%-11%) and when ever wealthy people get a windfall of money they slush it into the stock market. The problem is people aren't investing into new production as we still have a demand problem but on the upside people and companies are both deleveraging quickly which means in another five years many will be debt free and conditions will be good for expansion again.

[MichaeltheGreat]

It's projected to have lost the US government billions thus far.

Which will vaporize over time when you compare the tax revenues received from both the companies and workers still employed. There were no private lenders anywhere on the planet who would have signed on to a BK restructuring.

[DinoDoc]

Which will vaporize over time when you compare the tax revenues received from both the companies and workers still employed. There were no private lenders anywhere on the planet who would have signed on to a BK restructuring.

As of right now this statement which is what I responded to isn't true: Interestingly enough the "government takeovers" of the auto industry actually ended up making the US money. Fun that.

[Dinner]

A large part of the so called loses are from the government dumping its shares in mass right before the election for political purposes. If they slowly divested over time instead of flooding the market and driving share prices down they would have likely made money. In any event simply having those companies (and all the suppliers) around and paying taxes means they'll eventually make money. They still own shares right now (though a lot less of them) so they will still make billions more just in direct stock sales.

[MichaeltheGreat]

As of right now, it doesn't really matter. USG still holds 19+% of GM stock. So the "loss" is as yet unrealized.

[PLATO]

Actually it does, for many people. The fact is this, as consumer balance sheets improve more people are qualified for loans. Denying that is silly.

Not sure what book you are reading or class you have taken, but I will put my 25 years granting credit and setting credit policies up against them in any real world situation.

In other words, credit score. And many improve their credit score buy paying off their debt, especially in this environment where debt has been so high. So consumers are in control of their own credit score if they have assets, and increasingly they are owning assets.

Credit score is a huge factor (in my opinion credit scores are stupid...when markets moved from credit grading to credit scoring we started seeing a lot of really stupid loans), but even more important is debt to income ratio. Interestingly enough, paying off debt can, in some cases, actually decrease your credit score and rarely has an immediate impact for the positive. Paying down debt usually has an immediate positive impact...go figure.

[DinoDoc]

As of right now, it doesn't really matter. USG still holds 19+% of GM stock. So the "loss" is as yet unrealized.

So it still hasn't made the government money?