Debt and deleveraging – Part 3a: have US consumer debt dynamics worsened?

Just as an aside, I read in some Canadian paper that US total household debt as a % of “income” was some 160% at its peak.  I do not know where this 160% came from: I get credit market instruments to personal disposable income of 130% at its peak and not 160%.  

At 153 per cent, Canada’s household debt to income ratio is at a record high, the report released Thursday said.   That’s still below the 160 per cent level that preceded the housing collapse in the United States four years ago.

I looked at the CIBC report the article referred to and could not find the 160% quoted, but did find a chart that showed US debt to income at close to 150% of income in Q1 2011.   This data did not correspond with the figures I had, so I was fiddling around with BEA and Federal Reserve stats to see what income figure was being used as the denominator – to no avail, but I did find this:


This shows total household and NPO debt to wages and salaries divided by the debt to disposable income ratio: essentially, while debt to personal disposable income has been falling, debt to wages and salaries has been rising.   Now whenever we isolate a component of data (wages and salaries from National Income) and apply a statistic drawn from the whole population (debt), we risk inferring an incorrect conclusion.  But the trend is interesting and it suggests that the debt dynamics have worsened and not improved. 

Obvious really, profits are at historical highs, and employment participation ratios are at low rates.   So there are of course serious social implications of this data…..

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