Posts filed under “Economy”

Household Debt

I’ve said this before: Betting against the US consumer has been a losing wager. And yet when we look at the parabolic rise of non-mortgage houshold debt (via the Research dept. of the St. Louis Fed) one cannot help but imagine that it eventually will be  problematic.

The issue is one of timing.

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Household Credit Market Debt Outstanding (non-Mortgage)
(billions of dollars)
1953-01-01 to 2005-01-01
Cmdebt_max

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UPDATE  June 11, 2005 12:02pm
Someone in comments suggested this chart merely reflects population trends. I doubt that. For one thing, it started at Zero in the mid-fifties, while the population was a bit higher than that. But more significantly is the exponential acceleration  of that curve — a true geometric gain would look like a straight line higher as the population expanded.

Not only are we becoming more indebted, but we are doing so at a more rapid pace. You can draw at least 3 separate trend lines on that chart — 1960-80; 1985-96 1999-2005 — each running at a higher rate than the prior trend.

Again, its been a losing wager betting that this ends tomorrow. However, that will not be the case forever. Whoever figures out exactly when the U.S. consumer gives up the ghost — with a Q or so — stands to make a lot of money betting on the downside, shorting retailers, banks and consumer cyclicals to name but a few.   

Source:
Household Sector: Liabilites: Household Credit Market Debt Outstanding
Board of Governors of the Federal Reserve System
Last Updated:     2005-06-09
http://research.stlouisfed.org/fred2/series/CMDEBT/97/Max

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