US household wealth regains pre-recession peak

[odput]

http://money.msn.com/business-news/article.aspx?feed=AP&date=20130308&id=16208768

"
The Fed report also showed that Americans are increasingly taking on more debt, enabling them to spend more. In the October-December quarter, household debt rose 2.4 percent. It was the sharpest gain in nearly five years.

And it marked a shift from when the recession ended in June 2009, after which many households focused on repaying debt rather than borrowing. Economists increasingly think that process, known as "deleveraging," is ending.

"The drag from deleveraging is now a thing of the past," Smith said. "Household credit is once again supporting growth."
"

Because taking on more debt allows you to spend more?

How does that work?!?

[the fixer]

The way economic news is presented has been annoying me lately, too. It's called the wealth effect, that people feel wealthier due to their house being worth more, so they spend more.

I just can't wrap my head around what all those people are thinking out there... a number on a piece of paper says that an asset you own, that you probably aren't planning to sell anyway, and if you did you'd pay a correlated price for a replacement, is worth X% more than last year, and this is supposed to make you waste more money???

When my investments appreciate I know I'm worth more, but rationally if I were to spend it I wouldn't be worth as much anymore! It's like these people don't understand what it means to get ahead.

[Jamesqf]

The Fed report also showed that Americans are increasingly taking on more debt...

In my case at least, that's just an artifact of the "we'll give you $100 to use our 0%-interest-for-a-year rewards card". 

[mm31]

Household credit is once again supporting growth

I can't believe he said that with a straight face, as if 2008 didn't happen.

[plantingourpennies]

I realize this is probably an uncommon example, but in 2011 an increase in our home's value allowed us to borrow against it an invest in a duplex, which produces a slight bit of income and has doubled in value since purchase.

Low income households could also borrow against the value of their home to replace a car that breaks down often so they can continue to get to work.

Not saying that an increase in home values always leads to good credit decisions, but having no access to credit because your networth is zilch isn't always a great thing either.

[Forcus]

I realize this is probably an uncommon example, but in 2011 an increase in our home's value allowed us to borrow against it an invest in a duplex, which produces a slight bit of income and has doubled in value since purchase.

Low income households could also borrow against the value of their home to replace a car that breaks down often so they can continue to get to work.

Not saying that an increase in home values always leads to good credit decisions, but having no access to credit because your networth is zilch isn't always a great thing either.

Right, no problem with that really. But most people I know that pull(ed) money out pre-recession were buying bass boats and Corvettes.