After opening lower stocks gained in late morning trade and look to finish with small gains despite little real news. A 4.6% 30-year contract rate has pushed refinancing demand to a 15-month high as per the MBA. Purchase activity has resumed its decline after some recent improvement. This I think is the real story; despite a generational low interest rate, and dramatically improved affordability, home purchase activity remains anemic.
The NY Fed is out with a new report detailing Total Household Debt. From the 2008 peak of 12.8 Trillion, household debt has fallen 6.4% to 11.7 Trillion in the 2nd quarter. Also noted in the 2nd quarter, delinquency fell for the first time since early 2006 falling .7% to 11.2%. The graphs in the report go back to the 1st quarter of 1999 and show total debt at 4.6 Trillion the peak of 12.8 Trillion achieved in 2008 represents growth of 278% over a 9-year time frame. Income was essentially flat over the same period, so were stocks and now housing as well. Which serves to illustrate what I have been saying all along, this is a credit-induced bust brought on by the assumption of too much debt. It will likely take a decade to fix, if not two, ala Japan. As the debts need to be either liquidated in bankruptcy or paid down before another credit cycle can begin.
The Total Household Debt, Savings Rate, Consumer Credit and Senior Loan Officer reports show credit and debts being reduced and repaid. While the foreclosure and bankruptcy data shows debt being liquidated. As the following from the Administrative Office of the US Courts shows, for the year ending June 30th bankruptcies hit a 5-yrear high of 1.57 million a 20% increase over the previous year. During the April to June period filings broke 400,000 for the first time since the record 667,431 filings ahead of the 2005 Bankruptcy and Abuse Consumer Protection act, aka the Indentured Servitude Act. On a per capita basis Nevada was numero uno at 11.74 filings per 1,000 people, numerically California saw the most filings with 241,975 as per the report. Yet these factors are rarely if ever discussed by the mainstream media, economists or policy wonks.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
