What’s Behind the Subprime Consumer Loan Implosion?

Wolf Richter
Level: expert
www.nakedcapitalism.com, 2019
Perspectives: Behavioral Economics, Post-Keynesian Economics
Topic: Behavior, Crisis, finance, financialization, mainstream critique, money & debt
Format: podcast
Link: https://www.youtube.com/watch?v=bswyrpfYwTg

This podcast looks at the rising number of consumers who have trouble to finance their loans on credit cards and cars. These rising "delinquency rates" were doubling since 2016 and are now higher than in the Financial crisis in 2008. Especially small banks lend to less creditworthy so-called "subprime consumers" because they can demand higher interest rates from these financially troubled individuals.


However, to understand why these "delinquency rates" are now higher than in the financial crisis a critical look at the inflation measuring method of the US becomes necessary. The hedonic quality adjustments of the Consumer Price Index, which removes the effect of quality improvement on consumer prices, is shrouding the fact that rising costs on mobility, food and health care outruns the raise of income for more and more US citizens. Forcing them to indebt themselves more and more to sustain their living standards.

You can find the transcript here.

This material has been suggested and edited by:

Spenden

Das Netzwerk Plurale Ökonomik e.V. wird aufgrund seiner Unabhängigkeit und des Einsatzes für Pluralismus und Vielfalt nicht von finanzstarken Interessensgruppen getragen. Deshalb freuen wir uns sehr über eine einmalige oder dauerhafte Spende.

Spenden