The New York Fed is out with the latest quarterly report on US household debt. The most important graph is this one showing the total balance of debt:
As you can see, the nominal value of outstanding debt increased in Q1 2011 for the first time since early in the great recession. However, I like to look at the debt divided by disposable personal income, and in those terms, the decline continued, albeit at a slower pace:
In other words, although debt increased in dollar terms, it didn't increase as fast as people's nominal income (which incorporates both inflation and real income increases).
Note that the red line above is a general indication of where the current direction of the trend is taking us, and is not a forecast. I don't know how fast or how long deleveraging will continue.
The other significant news seems to be that total credit card limits started to increase for the first time since the recession, at least in nominal terms:
The fraction of loans delinquent continued to decline, but is still at very high levels:
"I like to look at the debt divided by disposable personal income..."
ReplyDeleteI like to look at debt divided by the quantity of money. It gives a feel for monetary imbalance and the factor-cost of money.
Stuart> However, I like to look at the debt divided by disposable personal income, and in those terms, the decline continued, albeit at a slower pace:
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Yes; as percent of personal income.
But break out personal income into wages vs. benefits vs. government benefits; you'll see a trend towards the latter two growing rather more briskly (and non stop) compared to the first.
This isnt a sustainable trend as we get more and more Boomer's onto the Social Security and Medicare systems, and as the time to change the programs (in a way that wont cause horrific pain) closes simply as the population that's already here, ages.
And as the oil clock, and the debt clock (of every government in the world) keeps on ticking away.
Hear it now?
Louder than ever.
Soon to be a hurricane.
Ticking hurricanes - my metaphor processor is throwing exceptions :-)
ReplyDeleteWell. A cacophony then.
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The government already has Line 35, income without transfer payments.
That peaked out in 2007, and looks like that's an inflation index number, so might want to adjust that out a bit more.
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Unemployment insurance number (Line 19) looks freakishly high; you may want to consider adjusting that, but certainly explains why many states are looking to cut down on benefits!
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Just look at Line 19 on its own and tell me THAT looks sustainable. Maybe if it was a tiny portion of the economy. But what happens when it's not?
I think I meant Line 18 at the bottom, Old Age Benefits and Health.
ReplyDeleteI'm also curious which line Medicaid is under.
Likewise for government contractors; are they under government or private? That might skew the numbers a bit since it's pretty obvious that contracting is taking huge hold in Virginia (around DC).
It there really a difference between deleveraging and bancrupting? See this WSJ analysis:
ReplyDeleteDefaults Account for Most of Pared Down Debt