A few years back the US Federal Reserve did a survey which revealed 47% of Americans couldn’t raise $400 cash in an emergency without selling something. Do you recall Marco Rubio in the GOP primaries harping about knowing families who live “paycheck to paycheck” Well the bad news keeps rolling in. Northwestern Mutual has pointed out that 45% of Americans spend up to half of their monthly take home pay on (mostly credit card) debt service alone….which, again, excludes mortgage debt.
The study went on to show that 40% of that credit card debt was frivolous discretionary spending (which they claimed was the biggest source of their problems) but only 20% were able to make minimum monthly payments. In short don’t be surprised to see defaults, bankruptcies and moral hazard rear its ugly head. Now we see a run on a Canadian mortgage lender. Does the poverty rate of 25% across EU vs 20% pre Lehman collapse raise red flags? Does sharply growing public sector employment across the majority of OECD countries since GFC not strike you as failed economic policy? Does 1/3rd of Aussies saying 3mths of continuous unemployment would lead to an inability to repay their debts? How the 65yo+ demographic is the largest prisoner cohort in Japan because poverty levels are climbing. Yes pensioners are breaking Into jail.
If anyone thinks record high asset prices is a reflection on our collective wealth think again. The worst thing about this bubble is that it is the accumulation of three massive bubbles that never cleared. Sadly this one will pop like one of those game shows with a balloon full of stinky slime.