Forum Post: The Things You Own End Up Owning You

http://www.reboilroom.com/2011/12/perspective-on-household-debt.html

Perspective On Household Debt Last week the Fed released the latest household debt numbers through Q3. While there is a lot of information to digest, we want to provide some perspective on the deleveraging taking place in the private sector.

During the spending peak in Q3 2008 (as the crash was taking place), households were $12.06 Trillion in debt. As of this past Wednesday, households are $10.79 Trillion in debt (Note: both numbers exclude student loan debt). That's a deleveraging of ~11%, or $1.27 Trillion.

As the economy continues to struggle, it's important to understand that although the Keynesians are flooding the economy with cheap money, households are choosing to pay down their debt instead of consume as much as they traditionally have.

One other things we'd like to point out is that although there is deleveraging taking place, households are still struggling to stay current on their obligations. Pre-crisis levels of delinquency were only ~5%, while today delinquency is at ~10%.

In summary, households are recognizing the difficulty they face in the labor market, so they're furiously trying to pay down debt - however, some are still falling behind on their obligations.

It is important to note, as you will see, that as households do pay down debt, they are finding it a bit easier to stay current. Some lessons are learned the hard way.

None of this information points to a strong recovery any time soon.