For the first time since the early 1990s, the debt load of US consumers is finally dropping. And it’s dropping at a faster rate than it ever has.
Most of this austerity is probably forced: Lending standards have (finally) tightened, 10% of the country is unemployed, and many folks have walked away from their debts. But there are probably some lessons-learned in there, too.
Regardless of of what’s causing it, in the long-term, the debt-reduction is good: We borrowed so heavily from the early 1980s through 2007 that consumer credit soared over 100% of GDP. Reducing this debt, and strengthening the consumer balance sheet, will eventually make the economy more healthy.
In the short term, of course, reducing our debts means spending less, because you can’t spend money you aren’t borrowing. (The notable exception to this is when the debt is reduced via default, in which case the debt is merely transferred to the government and taxpayers via bank bailouts and subsidies).
Here’s a snapshot of the consumer debt picture from Asha Bangalore at Northern Trust:
And here, from the Fed, is US consumer debt:
And here, from Ned Davis, is consumer debt as a per cent of GDP:
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.