Monday, August 15, 2016
Debt service is a financial cost imposed on the non-financial sector -- on production and consumption. To the extent that debt service moves money from the non-financial to the financial sector, it hinders production and undermines consumption.
The data on debt service is for households. So I will confine my remarks to household expenditure, to consumption.
When debt service is low, consumers have more money left over for other things. When debt service is high, consumers have less money left over for other things.
When debt service is rising, it is an indication that consumer debt is high or that consumer borrowing is on the rise. If borrowing is on the rise, GDP is probably on the rise. If debt is high, maybe not.
When debt service is falling, it is an indication that debt has been falling or has been rising more slowly than usual. If the latter, GDP may be on the rise. If the former, maybe not.
Posted by The Arthurian at 5:11 AM