Weekly Round Up – February 21, 2014

Before we get to the good reads!

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A Few Good Reads

Here are a few of my favorite reads from the past week.

1. Student debt may hurt housing recovery by hampering first-time buyers:

The growing student loan burden carried by millions of Americans threatens to undermine the housing recovery’s momentum by discouraging, or even blocking, a generation of potential buyers from purchasing their first homes.

Recent improvements in the housing market have been fueled largely by investors who snapped up homes in the past few years. But that demand is waning as prices climb and mortgage rates rise. An analysis by the Mortgage Bankers Association found that loan applications for home purchases have slipped nearly 20 percent in the past four months compared with the same period a year earlier. Understand more

2. Household debt rises at fastest pace since global financial crisis:

Families boosted their borrowing late last year at the fastest pace since the global financial crisis, a sign that Americans are gradually reopening their wallets as they feel more secure in their jobs.

Household debt jumped $241 billion to $11.5 trillion in the fourth quarter, the biggest increase since the third quarter of 2007, according to data released Tuesday by the Federal Reserve Bank of New York.

“This quarter is the first time since before the Great Recession that household debt has increased over its year-ago levels, suggesting that after a long period of de-leveraging, households are borrowing again,” said Wilbert van der Klaauw, an economist at the New York Fed. Understand more

3. Americans Are Taking on Debt at Scary High Rates:

Americans are known risk-takers when it comes to their personal finances. While consumer spending has traditionally been one of the great engines of the U.S. economy, it also helped get the country into the Great Recession. So after five years of economic turmoil we’ve presumably become a little better at keeping track of our debts, right?

Not really. Data released Tuesday by the Federal Reserve Bank of New York show that at $11.52 trillion, overall consumer debt is higher than it has been since 2011. And more unsettling, debt is rising at rapid levels. Americans’ debt—that includes mortgages, auto loans, student loans and credit card debt—increased by 2.1%, or $241 billion in the last three months of 2013, the greatest margin of increase since the third quarter of 2007, shortly before the U.S. spiraled into recession. Understand more

4. Obama Signs Debt Ceiling Measure Into Law:

President Barack Obama on Saturday signed separate measures into law to lift the federal debt limit and restore benefits that had been cut for younger military retirees.

Obama signed the bills during a weekend golf vacation in Southern California.

The debt limit measure allows the government to borrow money to pay its bills, such as Social Security benefits and federal salaries. Failure to pass the measure, which the Senate passed 67-31 earlier this week and sent to Obama for his signature, most likely would have sent the stock market into a nosedive. Understand more

5. Blank Check: What It Means to Suspend the Debt Limit

Some commentators have criticized use of the phrase “blank check” to describe the recent vote to suspend the debt limit for more than a year. They argue that the debt limit suspension merely means that the Treasury is allowed to borrow for the purpose of covering spending Congress already approved.

That is only part of the story. Here is why the “blank check” analogy applies.

A Debt Limit Suspension Waives the Debt Limit:

Contrary to widespread reporting by the media, Congress did not actually increase the debt limit on February 12. Instead, Congress rendered the debt limit statute inoperative, thereby waiving the debt limit, through March 15, 2015. This means that there is no debt limit in place to control borrowing for more than an entire year. Understand more