The Economy is Holding Its Own

Employment showed a gain of 166,000 in payroll in October, which followed a gain of 296,000 over the 3rd quarter.  The third quarter GDP increased 3.9% despite another drop in home construction.  It seems like inflation remains in check for another period of time.  Whew! Thank God.

Regarding the subprime crisis, this is a thought...The total US credit debt is about $46 trillion.  If you subtract the Fed, state & local government debt, that leaves the private sector debt at $23 trillion.  The total subprime motgage debt outstanding is about $1.3 trillion, about 16% of these are in default.  If the lenders only get about 50% of the value of the defaulted loans by selling the collateral (the houses) or giving new loan terms.  that would be a $100 billion loss.  To you and me that is BIG money but as a percent of total private debt it is less than one half of one percent.  That puts things in a different perspective, eh.

Gina Gulliford, Long & Foster, Columbia, MD