Delinquent Debt in America
By Caroline Ratcliffe, Signe-Mary McKernan, Brett Theodos, Emma Kalish, and additional authors, Urban Institute, July 29, 2014
Roughly 77 million Americans, or 35 percent of adults with a credit file, have a report of debt in collections.
The 77 million are also 25 percent of all Americans, including children.
In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates
JESSICA SILVER-GREENBERG and MICHAEL CORKERY, July 19, 2014, dealbook.nytimes.com
Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, …
… subprime auto loans can come with interest rates that can exceed 23 percent. The loans were typically at least twice the size of the value of the used cars purchased, …
Many subprime auto lenders are loosening credit standards and focusing on the riskiest borrowers, …
… the volume of total subprime auto loans increased roughly 15 percent, to $145.6 billion, in the first three months of this year from a year earlier, …
Student Loan Debt by Age Group
Federal Reserve Bank of New York, March 29, 2013
First Official Three-Year Student Loan Default Rates Published
U.S. Department of Education, September 28, 2012
Too Big to Fail: Student debt hits a trillion
Consumer Financial Protection Bureau, Rohit Chopra, March 21, 2012
Grading Student Loans
Liberty Street Economics, Federal Reserve Bank of New York, Meta Brown, Andrew Haughwout, Donghoon Lee, Maricar Mabutas, and Wilbert van der Klaauw, March 5, 2012.
Degreeless in Debt: What Happens to Borrowers Who Drop Out
Education Sector, Mary Nguyen, February 23, 2012
Don’t Count on Settling Those Student Loans
The Atlantic, Megan McArdle, June 10, 2011.
Birgit Grodal, Comment on L. H. Summers, The Scientific Illusion in Empirical Macroeconomics. Scandinavian Journal of Economics 93 (2), 155-159, 1991.
According to Grodal, the reason why sophisticated macro-econometrics has little impact is that the underlying macroeconomic theory is insufficiently developed.
Macroeconomic models are based on unwarranted simplifications. They use one or a few commodities, one or a few representative consumers and producers, perhaps a public sector, and simple institutional arrangements. Yet the conclusions drawn from these models are treated as if they hold in economies with many interacting agents.
There is no basis in economic theory for believing that these models should give a good description of the way an economy with many agents operates.
Only in economies where all consumers have identically homothetic preferences can the demand side can be represented by a representative consumer.
That is true if all income distributions are allowed. If only a fixed income distribution is considered, then it may be possible to represent the demand side by a representative consumer, but only under severe restrictions on the preferences of the individual agents. In this case, the welfare implications of economic policy for the representative consumer can be the opposite of the welfare implications for all the original consumers.
Thus it is not surprising that macroeconomic relations derived from theory are usually rejected empirically. The only way to obtain better empirical macroeconomic models is to develop better macroeconomic theory.
Grodal recommends studying the distribution of agents’ characteristics and using it to derive conclusions about aggregate behavior.