I'm assuming 175k is net income & not gross b/c taxes would eat up roughly half of that already.
I'm curious about the break-down of their household debt & the percentage that is mortgage, student loans, auto & consumer debt.
Worryingly is they are in their 40s...
Where we stand: American stock of debt.
Some good news: credit card debt stock is down & student loans down.
So apparently an American family making over 98k (prolly gross so net is much lower) & they got consumer debt of 92k, 32% higher than 2004.
What are they buying? And why are Americans paying such high interest rates to consume?
Millennials are the worst among the age group.
I like these kinds of articles from the WSJ because it helps us push for positive change about American culture where people consume way above their means.
Credit card down but auto + student loan growth up. Seems like people buying nicer cars than they can afford.
Another anecdotal story in this macro trend: a couple in their late 40s making 150k combined (so net likely 100k) & somehow got:
4k of mortgage per month (living in a nicer house than they can afford)
4 car loans (why 4 cars??? omg)
Student loans
Madness. American nightmare.
This story gets way worse. So they somehow got so much debt (2 adults but 4 car leases + 4k mortgage + student loans & credit card debt) & she now decides to take out 5k from her 401k (retirement) to re-educate herself.
I mean, she didn't payoff her old student loan debt!
The theme from the 3 anecdotes is that people GOT ZERO PLAN for WORST CASE SCENARIO.
How is it that people don't know that:
a) If u have a lot of debt, u have to pay back
b) That depends on ur income, which can be volatile so need to have savings
c) Will age & can't work forever
Also the story is interesting in that these people all have debts w/ very high rates which means they likely have limited understanding of opportunity costs of consumption & that means likely low investment.
Why have outstanding student, auto & credit debt & yet high mortgage?
Toxic mix:
*System pushes people to take on debt - media telling people they deserve to live on materially higher standard living than they can afford & buy, buy, buy on debt
*Asset prices inflated so essentials cost more
*Lock-downs kill jobs
*People make poor financial choices.
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Who likes higher fuel prices in Asia??? Well, no one except Indonesia and Malaysia and by that I mean exporters.
The biggest deficit as a share of GDP goes to Thailand but mostly in LNG. Second is South Korea.
Obvs this is as a share of GDP. Higher fuel costs = higher import costs = someone has to pay for it & eg higher inflation or higher fiscal costs.
Who likes higher food prices? Well, a few - Thailand, Malaysia, Indonesia, Vietnam and India. Obvs this is EXPORTERS only who gain. EM has high food as a share of consumption basket. But net food exporters have levers to pull. They can BAN exporting of food.
Who is most vulnerable? The Philippines. South Korea imports a lot too.
Putting food and fuel together as a share of GDP: Who is most exposed?
Well, South Korea and the Philippines. KRW doesn't like this news.
PHP doesn't like it. One caveat is that SK is much richer so can afford it more than say PH where this will hurt more.
Did you know that South Korea exports more to the US now than it does to China?
Actually, it isn't alone. A lot of Asian countries, due to supply chain reshuffling and also geopolitics and industrial policies, are exporting now more to US than China.
Why is South Korea doing more trade with a country far away than a country next door?
First, growth of exports to the US is faster than exports to China. In fact, China hasn't been importing much more and it is Korea that has been importing more from China for goods such as intermediate goods etc.
This has raised a big concern in Korea that China is a competitor & it's hard for SK to compete with its industrial policy and subsidies.
And so South Korea has 1 lever it can pull that is better than China - GEOPOLITICS. South Korea is an ally to the US. And as a country w/ a US FTA, it is being favored.
Whether it's the Chips Act or the Inflation Reduction Act (IRA), the whole point is to exclude China.
Indonesia elects a new president in a week. The leading candidate is riding high on Jokonomics, or the continuation of his policy & popularity, as Jokowi's eldest son is VP.
Prabowo promises 8% average GDP growth or Jokonomics. How realistic & what is Jokonomics anyway?
While people believe that Prabowo is the best bet of doing more of what popular Jokowi has done for Indonesia in the past decade & he promises the highest growth, Jokowi 10-year only produced 4.2% GDP growth on average. Stripping out 2020 (Covid), it's 4.9%. No where near 8% 👈
Indonesia elects a new president next week to replace Jokowi. The leading candidate - Prabowo - is riding the president's coat tail as many hope that he is the best hope for continuation. But what is Jokonomics exactly? From 2014 to 2023, Indonesia grew on average 4.2% per yr👈.
If we strip out 2020, which economy contracted, then under Jokowi, the economy grew 4.9% on average (4.2% if we don't strip it out).
So that's sub 5%. In fact, GDP barely deviates from 5% level. So why do people think that Prabowo is the key to escape the middle income trap?
Pres Jokowi's biggest accomplishments come from the fiscal side. Indonesia got investment grade in 2017. By weaning Indonesia slowly off expensive energy subsides, the expenditure side was contained. And with the commodity boom, Indonesia fiscal positions were leaner than most.
As we bid adieu to 2023, which was an abysmal economic year for EM Asia (India an exception), hope springs eternal as we look to 2024 with key drags dissipating.
The great expectations of China lifting the region via imports and tourism disappointed as demand faded, weighed down by property market woes & weak investment.
From Korea to Vietnam, exports to China crashed, dragging down overall shipment, hurting big traders the most.
The goods deflation felt globally, especially in ICT, hit big traders hard. Commodity exporters such as Indonesia too didn't like the downward price trend.
Despite stronger US growth, China downward import growth dragged Asian exports.