This recovery is anemic because total (household and government) debt is high and falling! Consumer credit actually declined by 2.5% in ’11 and total debt fell from 203% of GDP to 202% in ‘11; about $160,000/working age person. At the end of the ’01 recession debt was $80,000, and at the end of the ’91 recession just $20,000. Usually, in recoveries debt rises quickly spurring the economy, but not this time.
Tag Archives: government debt
Not all Debt is Equal
While being in debt is not so great for a household–because interest payments leave the household and go to a bank, or credit card company, debt can be tolerable for a country. If the debt is largely internally held (Japan), interest payments go from the government to domestic creditor households. The problem is that to pay the interest, governments must either raise taxes or print money; both of which have drawbacks.