I was very much relieved to discover, when I finally went and looked at it, that Excel's linear trendline for that scatterplot we've been looking at is not upsloping left to right:
Rather, it runs in the same general direction as the lines that connect the dots.
I think the relationship of household debt service cost to economic performance is this:
ReplyDeleteWhen the economy is performing well the cost of debt is high.
When the economy is is not doing well the cost is low.
If we use household medium income as a proxy for economic performance we see that when debt service is high , median incomes are high and when debt service is low, median income tends to be low
https://research.stlouisfed.org/fred2/graph/?g=1RF8
Hey, Jim. How about this:
ReplyDeleteWhen the economy is performing well, people can afford to pay down their debt a little faster, and they do.
When the economy is not doing well, people can't afford to pay down their debt faster, and they don't.
We are looking only at the post-1980 years. It was probably different in the 1950s and 1960s when people were borrowing more and faster in the good years, and didn't think they had too much debt.