Tag Archives: household debt

US debt to GDP and household debt service ratio

A few days ago I made a post about European debt to GDP ratio’s and how they did not show any signs of excess. Hereby are the same charts but this time for the USA. The first chart is a long term chart which shows the debt to GDP ratio for US non-financial corporations, the US government and US households from 1975 till 2019. As can be seen households have been deleveraging since the start of the Financial Crisis in 2008 while corporations and the US government have been steadily getting more in to debt.

US debt to GDP ratios for US non-financial corporations, the US government and US households from 1975 till 2019
US debt to GDP ratios for US non-financial corporations, the US government and US households from 1975 till 2019

Thanks to low rates and the above mentioned deleveraging of households debt service ratios for US households are the lowest in 40 years.

US household debt service ratio (Debt payments as % of disposable personal income)
US household debt service ratio (Debt payments as % of disposable personal income)

Via Guide to the Markets – United States

Total US Credit Market Debt As A Percentage Of GDP Is Declining

Too much debt was one of the main causes for the credit crisis in 2008. So I have been trying to figure out if the total debt-to-GDP ratio has been declining the last few years.

Total US credit market debt-to-GDP has indeed been declining from 385% in 2008 to 355% in December 2012.

Update (November 2013): Right now the ratio seems to be around 345%

us total credit market debt to gdp long term liabilities

In dollars total credit market debt has still been going higher, mainly fueled by the government spending, while household debt has been declining.

total credit market debt total household debt st louis fed

US Government debt.

US government total debt

We are moving in the right direction. To much household debt is bad for an economy because people who have run up to much debt will stop spending. Their debt needs to go down so they will have more money to spend on goods and services instead of on interest.

This long term chart which also shows total US credit market debt as a percentage of GDP for the great depression shows that we are following the same pattern as in the great depression.

total us credit market debt to GDP long term great depression

We are going to a more sustainable ratio. Only we are going a bit slower than in the ’30’s but that is maybe a good thing if we want to prevent a lot of civil unrest and the rise of fascist political movements as happened in the ’30’s .