Household Debt

Saturday, June 11, 2005 | 07:29 AM

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.

>

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

>

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

Saturday, June 11, 2005 | 07:29 AM | Permalink | Comments (23) | TrackBack (0)
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Comments

The geometric growth rate of this series makes me suspect that it is measured in nominal dollars and the magnitude of the series makes me suspect it is total housholds instead of per household.

Population grows at a geometric rate. The nominal price level grows at a geometric rate. Even if debt per household was constant on a real basis the graph in question would quickly shoot off to infinity.

Does this data exist on a per houshold and real dollar basis? If not, why not present it as a fraction of nominal GDP -which also grows at a geometric rate.

I suspect household debt has increased, I just can't tell from this graph.


[EDITOR: Take that argument up with the St. Louis Fed -- its their chart]

Posted by: marshal's ghost | Jun 11, 2005 10:41:58 AM

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