Trapped assets that generate no income streams in the present are not capital; the value of such non-productive assets is illusory. Strip away these trapped assets and the reality is revealed: most American households toil to service their debts.
The typical American household is insolvent: its debts exceed its assets. There is nothing fancy about calculating insolvency: if debts exceed assets, the enterprise is insolvent. By this measure, most American households are insolvent, if their real assets are marked to actual market.
For example:
Auto loan balance: $9,000
Actual market value of auto: $6,000
Credit card balance: $6,000
Street value of stuff purchased with credit card: $300
home mortgage: $250,000
Auction value of house: $200,000
Student loans: $60,000
Market value of education: Not applicable, as it cannot auctioned off or securitized
And so on.
The typical American household is thus in service to its debt, not to its assets, and to the holders of that debt.
This is debt-serfdom: serfdom in service to the owners of debt, debt that may well always exceed the value of the household's assets. This is debt-serfdom for life.
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It has been like this for at least 15 years.You get an auto loan and you need GAP insurance because the car loses half its value when it leaves the lot.
ReplyDeleteAT 47 years old this is one time I'm glad I am not in the majority! Got a little debt but nothing like what you are showing here.
ReplyDeleteYou pays you money and you takes you chances. A vehicle is not an investment it's an expense, just like a refrigerator or a mattress. What is a 1 year old mattress worth?
ReplyDeleteYou want to really see how much the debt is hurting you?
ReplyDeleteAdd up the interest charges for each of these debts per month.
The interest represents money you earn that you hand over to someone else. In other words subtract the monthly interest charges from you monthly take home pay.