Wednesday, December 14, 2011

Household Debt Ratios Are Lowest Since 1993-94

The chart above shows the ongoing de-leveraging of U.S. households based on new data released yesterday by the Federal Reserve.

In the third quarter of 2011, household debt service for required payments on outstanding mortgage and consumer debt as a share of disposable personal income fell to 11.09%, the lowest ratio since the fourth quarter of 1994; and the ratio for all household financial obligations (adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance and property tax payments to the debt service ratio) remained at 16.15% (same as Q2), the lowest ratio since the fourth quarter of 1993. 

Let that be a lesson for the U.S. Congress.....


At 12/14/2011 4:07 PM, Blogger Methinks said...

But, their government debt obligations are at record levels.


At 12/14/2011 4:24 PM, Blogger Che is dead said...

At he end of 2010 the federal debt was equal to $44,886.57 for every man, woman and child in the United States. That was up $10,429.64 from 2009. The government has managed to spend more again this year than last which means an additional $10,000.00 plus added to the tab - $40,000.00 plus for a family of four.

"The federal government has accumulated more new debt - $3.22 trillion - during the tenure of the 111th Congress than it did during the first 100 Congresses combined ...", a new record, breaking the old record held by the 110th Congress.

"The $3.22 trillion in new federal debt run up during the 111th Congress exceeds by 64 percent the $1.957 trillion in new debt run up during the 110th ... Democrats controlled both the House and Senate in the 110th and 111th Congresses." -- CNS News

So, it would seem that deleveraging done at the household level is a drop in the bucket compared with the tsunami of debt that the Congress has loosed during the same period.

At 12/14/2011 4:36 PM, Blogger Rufus II said...

A couple of "positives," however, is that the government is borrowing (so far, at least) at a very low interest rate, and, if we don't Completly screw the pooch will never be repaid, anyway.

At 12/14/2011 5:57 PM, Blogger PeakTrader said...

A lot of wealth disappeared from the housing and stock markets:

U.S. economy braces for old challenges, new headwind

Economists hold that trillions of dollars of U.S. household wealth has evaporated during the financial crisis, and the enormous loss of securities and housing values are weighing on the private sector demand and consumption.

"The natural reaction of U.S. households is to try to rebuild the wealth, and to do that by spending less and saving more," Nobel Prize laureate economist Robert Solow told Xinhua.

The deleveraging process will work itself out at a very slow pace, contended Solow, adding that "if that has to happen naturally, it could take three, four or five years."

U.S. household net worth, the gap between the value of assets and liabilities, further shrank by 2.4 trillion U.S. dollars from the second quarter this year to 57.4 trillion dollars by the end of September, latest figures from the U.S. Federal Reserve revealed.

It is the second straight quarterly decline, and the sharpest drop since the October-December quarter of 2008.

The U.S. household net worth has decreased by about 12 percent from its peak before the financial crisis.

Solow's view was echoed by Karen Dynan, a senior fellow at the Washington-based Brookings Institution, who argues that many U.S. households still remain "under a great deal of strain."

The fact that there is more deleveraging to come suggests that the overhanging debt remains a headwind to the U.S. economic recovery, noted Dynan.

At 12/14/2011 6:10 PM, Blogger Benjamin Cole said...

Federal spending is far too high.

Here is employment by federal agency founded by income taxes--a lot of these tax-eaters will get pensions, some after a scant 20 years of "working" on the federal dole.

Please start cutting:

Defense 3,200,000
Veterans Affairs 240,000 

Treasury 162,119 

Justice 124,870 

USDA 100,000 

DOT 100,000
Health and Human Services 62,999 

Interior 57,232 

Commerce 41,711 

NASA 19,198 

EPA 18,879
State 18,000 

Labor 16,818 

Energy 14,000 

GSA 14,000

At 12/14/2011 6:10 PM, Blogger PeakTrader said...

And median income is lower:

Income, Poverty and Health Insurance Coverage in the United States: 2010
SEPT. 13, 2011

The U.S. Census Bureau announced today that in 2010, median household income declined, the poverty rate increased and the percentage without health insurance coverage was not statistically different from the previous year.

Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.

•Since 2007, the year before the most recent recession, real median household income has declined 6.4 percent.

At 12/15/2011 9:36 AM, Blogger juandos said...

Ah yes, the newest propaganda arm of the Obama administration, the Census bureau...

"...the poverty rate increased and the percentage without health insurance coverage was not statistically different from the previous year"...

Hmmm, let's take a look at that poverty angle PT...

From the Heritage Foundation: Air Conditioning, Cable TV, and an Xbox: What is Poverty in the United States Today?

At 12/15/2011 10:52 AM, Blogger Che is dead said...

"I’m still amazed that the New York Times editorial page got away with opining about “Census data showing that 49.1 million Americans are below the poverty line” without telling its readers it was using the unfamiliar just-concocted New Poverty Line and not the poverty line that they thought was “the poverty line,” namely the one that has been used since the 1960s. I can’t tell if this was conscious fraud on the part of the Times or just incompetence ..." -- The Daily Caller

The Brookings Institute

At 12/19/2011 10:52 AM, Blogger morganovich said...

i would be interested to see this data with foreclosures and bankruptcies taken out.

i suspect it might show quite a different picture and therefore not be quite the lesson mark may be hoping it to be.

we have had what, 5-6 million foreclosures?

let's call it $5 and use a quite conservative $100k per home value.

that's $2.5tn.

that's 16% of GDP and even more of personal income (easily 25%)

in light of that, a drop in debt from 19% to 16% looks much less significant. 19 X .75 = 14.25, so we would expect and even larger drop from foreclosures alone. add in BK, and we could expect yet more.

this could be mitigated somewhat by a drop in earnings, but on its face, it looks to me like americans still granted access to debt are actually going deeper into it, but this is offset in the aggregates by foreclosures and BK.

this would seem to argue against the "good example of fiscal prudence" argument and toward one of default.

this seems supported by aggregate PCE being greater than income in most Q's over the last several years making it seem unlikely that large amounts of aggregate debt have been paid down.


Post a Comment

<< Home