I posted this over in Car Talk, but thought some of you who don't wander far from the Vintage forum may find it interesting as well.

Danielle DiMartino Booth is president of Money Strong and a former advisor to the Federal Reserve Bank of Dallas. Here is an excerpt of an article she recently posted on Linked-In. In case you didn't know...

"....

If only our economy had more growth industries. We’ve just learned that the economy grew by 1.4 percent in the final three months of last year. The sad thing is that’s a vast improvement over the last figure we had in hand of 1.0 percent. For the full year, the economy grew at a 2.4 percent rate, the same paltry pace it has since the recession ended in 2009.

As for the sole source of support of late? That would be the U.S. consumer, without which math tells us the entire world economy would be in recession, not just the United States. In the fourth quarter in particular, spending was buoyed by gains in Transportation and Recreational services.

Sound familiar? It should.

Cars have literally been driving the U.S. economy in the aftermath of the collapse in the energy industry which took high-paying jobs down with it. To be specific, car sales to marginal buyers who cannot afford the payment for very long have pushed car sales to record levels.

If you’re hoping this economic prop is sustainable, and you should be given the alternative, you’re apt to be disappointed. A recent Bloomberg story shed light on how sales have been turbocharged. As was the case with subprime mortgage lending which pushed homeownership to record levels, new car-financing entrants have been responsible for record car sales.

According to J.P. Morgan Chase calculations, among subprime lenders that tap the securitization market to in turn finance their operations, new entrants now account for 28 percent of the business, multiples of the single-digit market share they had between 2011 and 2013. That makes these corporate whippersnappers the biggest players in the market. Their secret weapon? That would be ridiculously lax underwriting standards to qualify unqualified buyers.

...."

Here is a link to her web site. It seems she has not posted this article yet.

http://dimartinobooth.com/

So what do you think? Are you ok with the "funny money" that is fueling the auto market? Are you concerned that it is already too late to avoid yet another collapse of sub-prime loans? Or do you think standards should be tightened now?

 

Maybe this very slow rate of growth is just the new normal. In fact it may just be a return to a normal that has lasted for more than half a millennium, right up to the industrial revolution. Robert Gordon certainly seems to think this is the case. And his argument is very compelling.

Who is Robert Gordon? He is an economist at Northwestern University and the author of a book called The Rise and Fall of American Growth.

Check out this Freakonomics podcast titled "Yes, the American Economy Is in a Funk — But Not for the Reasons You Think"

Both audio and transcript can be found HERE.

 

According to this source it's not the car's propping us up that's the concern, its the rest of the world that's keeping us down.
http://finance.yahoo.com/news/feds-w...110845729.html

 

I'm afraid,this thread is going to turn political,and end up in the...cemetery.

 

So what do you think?
In 2008 total outstanding Mortgages/home loans hit an all-time high of 14.8 Trillion before the collapse. The outstanding U.S. auto loan number in 2005 was 160 Billion, in 2014 902 Billion and as of this year we're at 1.04 Trillion. Yes it's high, could it be a balloon? Maybe. But to what degree, since numbers are so drastically different. Could this collapse be similar to what we've experiences before with Sub-Prime loans? I don't think so.

I'd like to mention that I am usually a pessimist and just shocked myself since I sound optimistic. We also need to take into consideration that I really don't know what I am talking about here and that all I did is, google Total outstanding mortgages from the past and compared it to total outstanding auto loans today.

La La La. I hope I don't get flamed or kicked out of the Vintage Owners forum. All I did is see Legal Bill post so I had to read it.

Now to answer your other questions:
Are you ok with the "funny money" that is fueling the auto market?
Nope. If you can't afford it and have iffy credit, you shouldn't be able to buy it.

Are you concerned that it is already too late to avoid yet another collapse of sub-prime loans?
Not concerned.

Or do you think standards should be tightened now?
Yes, I think more regulation wouldn't be a bad thing.



Hi Bill

 

I hope we can keep this out of the Black Hole AKA politics. Maybe if everyone sticks to economics...

After all, Economics and Poli-Sci are two different departments where I went to college.

 

but that was a looong time ago...

 

I am actually much more concerned over the student debt which is over $1.4T with no capitalization. Auto debt capitalizes the purchase and owning of a tangible item. The housing crisis was again to capitalize something tangible, but student debt can only be capitalized with the gaining of employment in excess of the debt, which for many folks is simply not a possibility at this time for many of the debt holders.

 

As I see this, it is no big secret that this is another topic that inherently involves government (including ^^^ regulation) as well as a less political economics. The existence in Vintage of a Politics venue enables topics like this to enjoy a full range of relevant discussion without playing semantic games and/or denigrating the Politics venue. It's difficult to do the dance; to artificially avoid relevant political comments within topics like this. That is clear. The Politics Subforum is a click away, and some interesting things continue to go on there, especially now, imo. And it's a "black hole" only if you want it to be. Topics like this belong there from the get go as do many of our most interesting topics. The only thing that would be worse than having such a Subforum in Vintage is NOT having one. But people here disagree, so we are quite familiar with attempts to walk a narrow chalk line without falling off. Push, push, push and let the mods be the bad guys! More fun that way!

Carry on....

 

You know what you are talking about. You were in the mortgage business, Dimitry. How have you been, my friend??