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Forgive Us Our Trespasses?
The Rise of Consumer Debt in Modern America

(Released February 2009)

 
  by Matthew Ruben  

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  1. 'As We Forgive Our Debtors': Mexico's El Barzón movement, bankruptcy policy in the United States, and the ethnography of neoliberal logic and practice

    Ann Kingsolver.

    Rethinking Marxism, Vol. 20, No. 1, Jan 2008, pp. 13-27.

    This article considers the question whether, in the face of rising indebtedness, there might be a social movement in the United States similar to El Barzón, a debtors' movement in Mexico particularly visible during and after the neoliberal financial crisis of 1994. The importance of middle-class consumer debt to the global economy (thus the powerful potential for debtors to organize) is mediated in the United States by increasing domestic surveillance and the links between neoliberal policy and neoconservative Christian logic in state administration. Historical, ethnographic, comparative, and collaborative possibilities for investigating social movements' potential to respond to increasing political and economic repression are discussed.; Reprinted by Taylor & Francis Ltd

  2. Consumer Debt Repayment Behavior as a Precursor to Bankruptcy

    Diann C. Moorman and Steven Garasky.

    Journal of Family and Economic Issues, Vol. 29, No. 2, June 2008, pp. 219-233.

    The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 culminated years of debate over the escalating number of bankruptcy filings and whether or not consumers were abusing the bankruptcy system. Our study focuses on the extent to which households seek bankruptcy protection without first attempting to restructure their debt or experiencing indicators of financial distress. Through multivariate regression analyses of longitudinal data from the Panel Study of Income Dynamics (PSID), we find a significant relationship between having prior financial problems and filing for bankruptcy. Our results also indicate that households that obtained consolidation loans were equally likely to file for bankruptcy as those that did not. We conclude that early interventions with financially distressed consumers may provide opportunities to reduce bankruptcy filings.

  3. Different Paths to Mass Consumption: Consumer Credit in the United States and West Germany during the 1950s and '60s

    Jan Logemann.

    Journal of Social History, Vol. 41, No. 3, Spring 2008, pp. 525-559.

    This article shows how differences in the way Americans and West Germans financed their consumption during the postwar decades underlines differences in social and cultural meanings of consumption. Consumer debt rose rapidly in postwar America. Many Americans came to regard credit as a means of ensuring democratic access to the American dream and to an expanding middle class. The federal government regarded installment credit as a viable way of expanding mass purchasing power and to reinforce a nascent consumer culture built on emulative spending and the rapid diffusion of new goods. By contrast, many West Germans-consumers as well as retailers and regulators-were more reluctant to embrace consumer credit. Financing consumer goods on credit did not become the hall-mark of new-found middle-class respectability in West-Germany. Rather, to many West German elites and middle-class consumers credit buying retained the stigma of a working class life-style. While the use of consumer credit became more common, it never reached the importance it had across the Atlantic. Far from being a model, the United States stood out as a peculiar case with regard to credit financing and household savings during the postwar period. Adapted from the source document.

  4. Does Consumer Sentiment Foretell Revolving Credit Use?

    Douglas J. Lamdin.

    Journal of Family and Economic Issues, Vol. 29, No. 2, June 2008, pp. 279-288.

    The rising level of consumer debt in the U.S. is well documented. Revolving credit (credit cards) has experienced this growth, with the level of outstanding revolving credit increasing by over 600% in inflation-adjusted dollars over the past three decades. The goal here is to gauge the extent to which consumer sentiment; namely, the University of Michigan Survey Research Center Index of Consumer Sentiment, has predictive power in explaining the aggregate use of revolving credit using time-series data. The results generally show that changes in the consumer sentiment measure are related to subsequent changes in revolving credit use.

  5. Predictors of Chapter 13 Completion Rates: The Role of Socioeconomic Variables and Consumer Debt Type

    David A. Evans and Jean M. Lown.

    Journal of Family and Economic Issues, Vol. 29, No. 2, June 2008, pp. 202-218.

    This study examined whether demographic or financial variables best predict completion of Chapter 13 bankruptcy plans. Multinomial logistic regression revealed that demographic variables were more important than financial variables in predicting completion. Completion of a Chapter 13 repayment plan was not associated with a debtor's monthly income or expenses. Never married debtors, dependent children, a previous filing, and higher mortgage arrears increased the likelihood of dismissal. Longer job tenure and home ownership improved completion rates. Discharge was associated with higher unsecured debts. Results can help improve Chapter 13 completion rates. Debtors need guidance in setting up realistic repayment plans. Financial counselors could help ensure that repayment plans are feasible and to counsel debtors who miss a plan payment.

  6. The anatomy of increasing inequality of U.S. family incomes

    Frederic L. Pryor.

    The Journal of Socio-Economics, Vol. 36, No. 4, Aug. 2007, pp. 595-618.

    This essay explores various components of a measure of pretax U.S. family income after adjusting for the size of the family in the U.S. in 1975 and 2000. Using data from the Panel Study on Income Dynamics, an important stylized fact is revealed: The rising inequality of property incomes, particularly dividends, interest, and rent, have played the most important role in the increase of overall income inequality. Contrary to popular belief, increasing inequality of labor income plays only a secondary role. For property incomes a simple model shows why this determining role in income inequality should continue for the next decade and, most likely, even further in the future. [Copyright 2006 Elsevier Inc.]

  7. Consumer Debt: Are Americans Dangerously Overstretched?

    Barbara Mantel.

    CQ Researcher, Vol. 17, No. 19, Mar 2 2007, pp. 193-213.

    Discusses the issues, background, current situation & outlook for consumer debt in the US. In the past several years household debt has risen faster than family income &, on average, exceeds annual income for the first time since the Federal Reserve started surveying consumer finances in the early 1980s: includes chronology. Adapted from the source document.

  8. Need or Want: What Explains the Run-Up in Consumer Debt?

    Christian E. Weller.

    Journal of Economic Issues, Vol. 41, No. 2, June 2007, pp. 583-591.

    After 2001, the U.S. has been marked by a record run-up in consumer debt. This debt surge was widely shared across demographic groups. In fact, it was more pronounced among middle-income and white families than among their counterparts. The data suggest that the run-up in debt is more a consequence of economic necessities than of profligate spending. This rise in consumer debt occurred against the weakest employment growth since the Great Depression, stagnant wages, declining health and pension benefits, sharply higher costs for housing, a college education, health care, and transportation. Families have also become more willing to be financially responsible over time. Further, the data suggest that families did not see a markedly sharper rise in their wealth in recent years than in previous years, when debt growth was more subdued. In addition, much of the wealth gains that families saw were due to a boom in the real estate market, which many economists believe to be overvalued, thereby casting doubt on the assertion that the run-up in debt was an investment driven phenomenon.

  9. The Rise in Personal Bankruptcies: The Eighth Federal Reserve District and Beyond

    Thomas A. Garrett.

    Federal Reserve Bank of St. Louis Review, Vol. 89, No. 1, January-February 2007, pp. 15-37.

    Personal bankruptcy filings in the United States increased, per capita, nearly 350 percent between 1980 and 2005. This paper first addresses the changes in economic and institutional factors that have occurred over the past 100 years, many of which have occurred in the past 30 years, which are likely contributors to the dramatic rise in personal bankruptcy filings seen across the country. These factors include a reduction in personal savings, an increase in consumer debt, the proliferation of revolving credit, changes to bankruptcy law, and a reduced social stigma associated with filing for bankruptcy. Given the availability of bankruptcy data at various levels of aggregation, the remaining sections of the paper contain results from several different empirical analyses of bankruptcy filings using various data sets. Careful attention is paid to personal bankruptcy filings in counties located in Eighth Federal Reserve District states.

  10. Subprime Refinancing: Equity Extraction and Mortgage Termination

    Anthony Cross and Souphala Chomsisengphet.

    Real Estate Economics, Vol. 35, No. 2, Summer 2007, pp. 233-263.

    This article examines the choice of borrowers to extract wealth from housing in the high-cost (subprime) segment of the mortgage market and assesses the prepayment and default performance of these cash-out refinance loans relative to the rate of refinance loans. Consistent with survey evidence, the propensity to extract equity is sensitive to the relative interest rates of other forms of consumer debt. After the loan is originated, our results indicate that cash-out refinances perform differently from non-cash-out refinances. For example, cash-outs are less likely to default or prepay, and the termination of cash-outs is more sensitive to changing interest rates and house prices.