Re: Greenspan finally cites "very large cash-outs" [was [SOCIAL CREDIT]

Dr. Bruce R. McFarling wrote (on the Social Credit list):

> Removing minimum deposit requirements, interest caps
> and other consumer protection measures put in under
> a more pro-consumer environment results in a temporary
> boost to the economy, until the consumer indebtedness
> itself is the limiting factor.  But its a one-off,
> and not a permanent solution to the problem of
> inadequate effective demand.

Yes!  This has been happening at an increasing rate
in the U.S.  My newsletter cited "cash-outs" from
real estate loans (where the owner either takes out
an "equity loan" or refinances and takes out extra
cash to spend on other things) for about five years
now.  In one year we estimated that 2/3rds of the
entire increase in GDP was from THIS source of debt-
financed growth.  Today, such borrowing against
homes probably exceeds the growth rate, as incomes 
have further lagged consumption -- but it is very
difficult to estimate the exact size of these amounts.

Only on Tuesday, finally, Greenspan finally said:

"I would say the ability to ... refinance, which
has reduced debt service charges for the American
homeower, but also the very large cash-outs, which
is borrowing over and above just refinancing the
mortgage, has been a very important issue in
financing consumers."

U.S. Senate Banking Committee, Feb. 11, 2003

***

These selected 27 issues of the CITS DEBT WATCH
address this issue:

http://groups.google.com/groups?hl=en&lr=&ie=UTF-8&scoring=d&q=%22cits+debt+watch%22+(refinance+OR+%22home+equity%22)&spell=1

In particular see this issue:

http://groups.google.com/groups?q=%22cits+debt+watch%22+%22-4%22&hl=en&lr=&ie=UTF-8&scoring=d&selm=3CF7F3FA.7EF6%40mit.edu&rnum=2

and search for this line:

"So -1 + -1 + -1 + -1 (real estate as "stable assets" + 1986 tax reform
act/record refinancings and "equity extraction" + record low interest
rates + social policy for affordable housing) distinctly adds up to
more than "-4" in terms of instability and risk of implosion of the
economy."

[if the line becomes split, put them together in the URL
box with no space]

Regards,

Curtiss Priest, Ph.D.
Editor and Publisher, CITS DEBT WATCH
-- 


           W. Curtiss Priest, Director, CITS
      Center for Information, Technology & Society
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