Newspaper article THE JOURNAL RECORD

...Others Suggest Consumers Increase Debt

Newspaper article THE JOURNAL RECORD

...Others Suggest Consumers Increase Debt

Article excerpt

In this age of financial prudence and retrenchment, a few advisers have made a daring suggestion: Perhaps the time is ripe to borrow some money.

Yes, they realize that debt was a 1980s kind of idea that went out with all the other excesses of that era. A central theme of the '90s to date has been cleaning up the mess.

But as time has passed, circumstances have changed considerably. Now that interest rates have fallen to their lowest levels in a generation, and many old loans have been paid down or refinanced, some observers say the balance has shifted in favor of the borrower.

"Money is cheap but nobody wants to borrow it," said James Grant in his Grant's Interest Rate Observer commentary. "Maybe it's time to volunteer."

Evidently people are starting to do just that. Edward Yardeni, chief economist at the Wall Street firm of C.J. Lawrence Inc., notes that the pace of consumers' installment borrowing, after falling steeply from 1989 through 1992, has since rebounded.

"Auto loans are up $8.7 billion over the past 12 months after falling sharply during most of 1991 and 1992," Yardeni said. "Revolving credit usage (e.g., on credit cards) is also moving up."

Meanwhile, the government reports that housing starts, an economic indicator closely tied to people's willingness to borrow, reached a 3-year high in August.

Nobody is predicting, or advocating, a new borrowing binge _ especially considering how long it has taken to recover from the last one. Still, there are signs that the recovery has been progressing well of late.

According to the American Bankers Association, delinquencies on bank installment loans to consumers fell to a nine-year low in the second quarter of this year.

As of June 30, consumer loans 30 days or more overdue comprised 2.06 percent of the total, down from 2.31 percent at the end of the first quarter and 2. …

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