Thursday, June 5, 2014

Household Debt as a Percent of Total Debt


Household Debt as a Percent of Total (TCMDO) Debt

Posted by The Arthurian at 4:00 AM

4 comments:

The Arthurian said...

You can see the housing bubble in this debt, starting around the year 2000 and peaking around 28% of TCMDO debt.

You can also see two previous peaks, one around 1966 and one around 1980, both clearly higher than the housing bubble peak. So, why was the housing bubble a problem?

Maybe because 28 percent of a really really big number is more of a problem than 30 or 31 percent of a much smaller number. Maybe that's it.

June 5, 2014 at 6:42 AM
Jazzbumpa said...

Maybe look at something like debt service/disposable income?

Anyway, big picture - non-finance corporate debt down, federal down, household down.

What's up?

Cheers!
JzB

June 5, 2014 at 1:26 PM
The Arthurian said...

"Anyway, big picture - non-finance corporate debt down, federal down, household down... What's up?"

Exactly, Jazz. Stay tuned for Part Four! :)

June 5, 2014 at 8:34 PM
jim said...

Art wrote:

"You can also see two previous peaks, one around 1966 and one around 1980, both clearly higher than the housing bubble peak. So, why was the housing bubble a problem?"

The problem was imbalance. For 60 years US households kept their liabilities in nearly perfect balance with their home equity and then suddenly found themselves $8 trillion out of balance...(see graph):
http://research.stlouisfed.org/fred2/graph/?g=CGm

That is about $50K per household drop in home equity while liabilities continued to grow. And there are still years to go before the balance is restored.

It is like being informed that half your savings have been wiped out - you don't react by going out and buying a new car (or by buying anything):

http://advisorperspectives.com/dshort/charts/indicators/Retail-Sales.html?Retail-Sales-adjusted-for-population-and-inflation.gif

And since one person's spending is another one's income the drop in purchasing means 10 million people lose their jobs.

June 6, 2014 at 7:19 AM

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