Levels and Growth Rates of Debt and Income

Yesterday we looked at the growth rates of household debt and disposable income:

Graph #1: Household Debt Growth less Disposable Income Growth
Where the line is above zero, debt is growing faster than income.
Where it is below zero, income is growing faster than debt

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.