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Friday, September 25, 2020

Lawler: Serious Delinquency Rate on FHA-Insured SF Loans Up Again in August — Bill McBride


The US economy is beginning to recover in some respects. But is the recovery being threatened by the overhang of private debt?

A fast recovery would take care of this issue on its own, but a gradual recovery or a setback would exacerbate it. 

To some degree this is a policy choice, but it also depends on the direction of the pandemic. The past is not always predictive of the future, but judging on the basis of previous pandemics, it takes about two year to work its way through a society enough to produce herd immunity, after many deaths. 

This obviously influences the willingness of the public to carry on normal business owing to the risk of exposure. However, what's new is the Internet and online transactions, with a delivery system in place.

So it appears that politicians and policy makers really need to be looking closely at the issue of ability to service private debt in the absence of a policy remedy unless there would be significant voluntary restructuring. 

The problem is, however, that it is a systemic issue. Ad hoc patches are are not well thought out are not likely to do the job.

1 comment:

  1. Compensatory covid lockdown fiscal policy mostly ended July...

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