Marketwatch reported that U.S. debt load falling at fastest pace since 1950s. Since the recession ended in June 2009, total U.S. debt — Household, Corporate and Governmental — has risen at the slowest pace since record-keeping began in the early 1950s:

“As a share of the economy, debt has plunged as a consequence of rapid deleveraging by families, banks, nonfinancial businesses, and state and local governments. The ratio of total debt to gross domestic product has fallen from 3.73 times GDP to 3.36 times. In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%. By contrast, in the 11 quarters before the recession began, in those bubble years of 2005, 2006 and 2007, total debt increased by $10.7 trillion, or 28%.”

While it is true that Washington has taken on a lot of debt since the recession ended, the private sector has paid off, written off or dumped on the government almost as much.

Hence, the net total debt is falling, as debt shifts from the private to the public sectors. As the chart below shows what the story above says, debt is growing slower than anytime since the 1950s (second panel).


Click to enlarge:



As the chart below shows, debt to GDP has declined. However, as the chart title says, Does Anyone See Deleveraging? Private debt share of GDP is at its lowest level since 2004. Government debt to GDP is at a new high. Overall debt to GDP is at is lowest levels since 2007. Are these the levels that one would blow the all-clear signal? Is this why we had the worst recession since the great depression? To get back to the 2007 levels?


As the chart below shows, overall levels of debt are at new highs. This has been driven by a surge in government debt. Remind us again on how we can talk about deleveraging when overall debt levels are at new world records?



Chart Of The Week
June 13, 2012
Bianco Research

Category: Bailouts, Credit

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Are U.S. Debt Levels Now Manageable?”

  1. NoKidding says:

    Foolish headline.

    If Government deficit spends $2Trillion, then GDP goes up $2Trillion (times a mythical multiplier if you believe that). GDP is about 15 Trillion, and last years deficit spending was about 1.5 Trillion, so in order for private debt-to-gdp to increase, the private sector would have to have increased borrowing by more than 10 percent! While housing prices are down 30%, 90-day delinquencies are at 20%, student loan delinquency is at 9%, and the labor force is falling relative to population.

    Meaningless innumerate shite.

  2. RW says:

    If you accept modern monetary principles then there was never a time when government debt levels were unmanageable so asking if debt is manageable now is a question that can only apply to private debt levels.

    NB: Including government debt levels in the charts has little relevance to the main thrust of narrative in the article but does limn what is probably the most important deficit of all: Government did not spend enough to compensate for the lack of spending/deleveraging in the private sector and therefore unemployment is still at high levels while economic recovery was weak and will remain so.

  3. perpetual_neophyte says:

    Barry – I think a lot of how you interpret the data depends on how you feel about sectoral balances (a la Godley) and the debt of a sovereign currency issuer. With a monetary system like the USA’s, if the economy is running a current account deficit, it seems like either the government or private sector can be net savers but not both.

    Looking at things from that perspective might give a different interpretation of the data above – even if it’s not “hurray!” it might be less “oh no! soooo much government debt (that we mostly owe to ourselves or is the financial savings of accumulaters of US dollars)!”

  4. preserve says:

    great charts. they provide a nice primer.

    I’m beginning to think long-term rates treasury rates are determining the private sector debt levels.

    The real question is whether the people that own the treasuries also own the banks.. Ie. why increase money supply when your locked in on the long bond/strip?

    Conversely, is it really bad that Spain’s yields are going up? It might actually lead to some thaw.

  5. 4whatitsworth says:

    All this data makes sense. Business seems to be extremely healthy with rising profits and decreasing levels of debt. Also most working consumers are in pretty good shape and have refinanced their house and paid off their credit cards.

    The question it appears that you are posing is “why no growth”? The real issue in my view is uncertainty created by bungling governments. Drivers of economic activity do not know what the government is going to do and do not trusts it to do the right thing. In addition in the long run what are the final tax rates and what will the overhead implications and social dynamics be from this government. In addition our neighboring trading partners have not addressed their long term issues so no one really knows how that turns out either.

    In my mind given the right time horizon there is no doubt that sustained lower overhead from tax rates or interest payments reward the drivers of economic activity. Once there is some certainty on the new rules of the game you will see economic activity in the United States increase.

  6. Woj says:

    Good points RW and perpetual_neophyte. As both point out the amount of public debt outstanding is not really relevant to debt being manageable (as long as the debt is denominated in US dollars). The real question is regarding the private sector and IMO, the household sector in particular. Unfortunately that relevant chart is not shown here, but the household sector had debt outstanding of approximately 66% in 2000 and 55% over the entire post-WWII period. Since peaking in ’07, household debt has now declined from ~98% to ~84% of GDP. To simply get back to the levels of 2000, US households will need to delever by an even greater amount than has occurred in the past 4 years. Unless incomes rise significantly (doubtful), this means households probably have several years left of deleveraging. This will continue to be deflationary and budget deficits going forward may not be large enough to reverse those effects.

  7. ilsm says:

    Deficits good if taxes low and wars go.

    My tea party member of the US house’s canned meme says ‘we cannot apply the 2011 budget deal, it will cut the war profiteering and raise taxes on people buying t-bills’, keynesian stimuli for the “well to do” is okay they cannot handle austerity like the little people who have no clout.

    If it cuts taxes or buys perpetual war the deficit is good.

  8. ilsm says:


    “The question it appears that you are posing is “why no growth”? The real issue in my view is uncertainty created by bungling governments.”

    The uncertainty is: how much more bad debts do the insolvent banks expose the US government to? That is why total household debt matters; it becomes US government debt.

    Bad debt and insolvent banks which hold it need to disappear. Austerity is needed in life support for insolvent banks.

    Socialized risk has stymied growth until the next bubble when some asset will have never-ending price appreciation and the fed won’t call it inflation or too risky to the banksters needing perpetual life support. Then the big banks may appear to be solvent.

  9. obsvr-1 says:

    Deleveraging debt that is being paid back is ugly to economic growth

    Deleveraging debt that is being written down is F-ugly

    As Steve Keene often says, “Debt that can not be paid back, will not be paid back”

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  11. Rookie says:

    Okay, so the Federal government has spent $5 trillion over the last 3.5 yrs it doesn’t have to buy time for individual, corporations, munis, and states to deleverage and readjust their spending habits. (Thus, the no growth, 4whatitsworth.)

    Are we better off? Well, we have $15 trillion in debt and at some point interest rates will go up, way up and we will be in deep, deep trouble. And, we have added a massive, unfunded, Federal healthcare obligation on top this timebomb. Anyone still wondering why CEOs (and everyone else) are taking their time (understatement) to make investments and hire people?

  12. perpetual_neophyte says:

    @ Rookie: How is it that the US Federal government (via the Federal Reserve), which can create an unlimited number of US dollars at will, “doesn’t have” the money spent?

    Through what process will interest rates rise in the future? What operational mechanism? If you say, “market forces,” I think you probably misunderstand the Treasury market. I know I did up until the past couple of years.

  13. DeDude says:

    We are clearly in a better position if debt as % of GDP is lower. The balancing between private debt and collective debt is of no real consequence. Whether I personally borrowed 10K or society, in my name, borrowed 10K still leave me with a liability of 10K (although in the case of public debt it will have to be paid back by taxes collected from me and then paid to the lender). The fear that interest rates would suddenly explode and make the debt unsustainable is only a sign that people don’t understand what it means to be a superpower with the ability to print its own currency in as high an amount as needed. The central bank can keep rates as low as it wants by simply purchasing debt until the market can handle the rest.

  14. Woj says:


    I agree with central bank ability to keep rates low and importance of being a currency issuer, but don’t understand why you also suggest whether debt is public or private “is of no real consequence.” The ability of the govt to print dollars makes the location of debt of extreme consequence. If the public debt was currently 200% of GDP and household debt was 0% (versus 100% and 84% now), the potential for a sustainable expansion driven by private credit growth would be far greater. Households cannot print money and therefore have a limit to borrowing before incomes and asset growth can no longer sustain interest costs. This liability is far different than the theoretical tax liability that will never be fully repaid (governments rarely, if ever, paid down debt throughout history and have less incentive with fiat currencies).

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