acting-man.com / Bill Bonner / December 8, 2014
Still too Much Debt
A faint breeze blew through the US stock exchanges on Friday. A few leaves fluttered. But Diary readers want to know: When is the next hurricane coming?
Alas, we get the newspaper no earlier than anyone else. It always has yesterday’s news… not tomorrow’s. That leaves us wondering and guessing and trying to figure out what comes next.
The storm that raged in 2008 was fundamentally deflationary. It was so predictable that we didn’t need tomorrow’s headlines; the weather forecast was obvious.
After decades of taking on debt, Americans started to stagger under the weight of their debt-service costs. When house prices fell, their knees buckled and their backs broke.
Households cut spending and reduced borrowing. But they are still heavily in debt. In 1971 – before the big credit bubble began inflating under the new fiat currency regime – American households had $5 of income for every $4 of debt.
Now, for every $5 of household income they have $12 of debt. That’s down from the “peak debt” of 2007 – at $13 for every $5 of disposable income – but still much more than the historic average.
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