Wednesday, May 20, 2009


I imagine this is largely being preached to the choir at this point, but there's a basic underlying truth that drives the US economy. On average, US citizens are in debt.

The current household leverage (debt:income) stands around 130%. There are lots of pretty graphs and figures and discussion here. It was around 133% in 2007. It reached those ridiculous heights in about 20 years, more than doubling where it was in the mid-80's. THIS was the driving factor behind the boom that went bust. Now, with people under water, trying to find the surface, the government is trying to stimulate spending and growth. The reality is that until people get their debt down to match their spending (ETA on that? Around 2018 if people try), the US economy will remain on a bubble.

In 20 years, the US went from a nation of savers to a nation of debtors. Until that foundation is built up again, the world's largest consumer market can't honestly recover, especially since your economy is based on consumption and spending now instead of production and exports.

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