Household Debt Has Gallen to 2006 Levels, But Not Because We've Grown More Frugal
Josh Sanburn, Time Magazine, 19 October 2012 (hat tip: Big Picture)
U.S. household debt has finally fallen back to pre-recession levels. So, we’ve finally learned our lesson about spending more than we make, right? Well, not really. The real reason our debt has dipped is that so many Americans defaulted on bills they couldn’t pay...
Well at least we are doing better. We are now at the same level we were in 2006 (11 trillion), which is still well into the housing bubble years, and I am scared to think what level we need to be at to get back to the pre-Vietnam War debt bubble - which granted was mostly government debt.In fact, says Mustafa Akcay, an economist at Moody’s, “nearly 80% of deleveraging is caused by defaults.” Only 20% of the decrease comes as a result of what he calls “voluntary deleveraging,” i.e. the hard work of paying down our debts faster than we borrow.