Yesterday we looked at the growth rates of household debt and disposable income:
|Graph #1: Household Debt Growth less Disposable Income Growth|
We looked also at the level of household debt relative to the level of disposable income:
|Graph #2: Household Debt (in billions) relative to Disposable Income (in billions)|
Both looks are important. But each graph leaves out half the important stuff. So I took the calculations for the two graphs and just multiplied them together:
|Graph #3: (Debt Growth/Income Growth)*(Debt Level/Income Level)|
The early years' activity on Graph #1 is reduced on Graph #3 because the level on Graph #2 is low. The late years' activity on #1 is exaggerated on #3 because the level on #2 is high.
Between 2000 and 2010 the graph now runs higher than the mid-1980s peak, not lower. That seems right. And in the years before 1966 the decline no longer starts immediately, but is delayed until perhaps 1963.