The Relentless Household Deleveraging In Charts

Tyler Durden's picture

While the narrower spreads in Europe created the unintended consequence of perversely reducing the urgency for banks to delever their over-stuffed balance sheets (and in fact in many cases likely make them worse thanks to the ECB), the US Household continues to (sensibly) slowly but surely reduce their leverage. As today's Bloomberg Brief notes though, the slow pace of deleveraging will continue to weigh on growth over the next few years - even as they have drawn down debt as a percentage of personal income from its peak in June 2009 at 114.76% to 101.1% at the end of 2012. There is a long way to go to the apparent Maginot line of supposedly sustainable 90% and with wage growth stagnant, the bulk will come from debt reduction in true balance-sheet-recession style - putting still more pressure on a perniciously polarized government to do anything about it.

While progress has been made, there is still a long way to go for the US Household to get to supposedly sustainable levels of debt to personal income...

...and it seems there is no interest in ramping up the spending that we do not have as credit card accounts remain dramatically lower than pre-debt super-cycle peaks...

...and while any deleveraging is good deleveraging, write-downs and defaults seem top of the list and the stability of recent months in 90-day delinquencies does not suggest 'improvement' as much as a pause in the pain...


Chart: Bloomberg

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battle axe's picture

Ron Paul will never get elected to the presidency. But he makes some good points. 

mraptor's picture

It is good he wont become president. because whoever get elected now will get blamed for the biggest crisis... not Bush and Obama..

A Nanny Moose's picture

About the only logical reason to NOT want Ron Paul as President is so Libertarians aren't blamed when that light at the end of the tunnel turns out to be a freight train.

JPM Hater001's picture

Well, you will never be elected and make a bad point.  Never let a crisis go to waste and there is one a-brewin.

Ron Paul wins every survey on "Who understands the economy best."


Born Patriot's picture

When are people going to admit that the economy is suffering because of decades of multiculturalism? This is blindingly obvious to patriots across America. We need to restore true American values and culture and get back to the CONSTITUTION. Only then can we restore prosperity to this great country. Vote Ron Paul 2012!!!

tmosley's picture

Literally everyone here knows it's you, RNR.  

Stop playing these stupid, childish games.

JPM Hater001's picture

Hey, isn't our monetary system based on the need to loan as much as last year plus the interest difference?

Rut roh.

JPM Hater001's picture

Please stop saying dumb things with Dr Pauls name in the context.

liberal-ism, fascism, communism, socialism would have all worked but if you want to blame multi-culturalism you're in the wrong country.

Sans-culottes's picture

Because you are living in the 1800s, how did you manage to learn to use the internet and of all things find ZH? Damn time traveling confederates

Nigh Eve's picture

"Born Patriot" is likely a "false flag" operative posting messages for the benefit of someone who is opposed to Ron Paul.

LawsofPhysics's picture

Very similar to pre-depression deleveraging.  The reason why my Grandfather and his generation always used cash and held some PMs.

bdc63's picture

Our grandfathers' generation is known as "the greatest generation" for a lot of reasons, and that is one of them.

I wonder if we will ever be "great" again ...

Moneyswirth's picture

We will be "great" salt miners for our Chinese overlords soon

SheepDog-One's picture

'The Greatest Generation' will be crushed soon when the next default robs all their pensions and 401K's.

LawsofPhysics's picture

SD,  most of that generation is dead.  You are referring to their spoiled kids, the baby-boomers.

SheepDog-One's picture

Yep, and they created most all of this shit.

ONO47's picture

Well, it looks like we will have the opportunity to show future generation what we are made of.

bdc63's picture

nice positive spin!  I like it.

midtowng's picture

These charts may be bad in the short-term, but they are very good in the long-term.

Ghordius's picture

I still have trouble in believing the rise in mortgages in the first part of the chart... Wow. Every time I am just stupified... For partecipants it must have been one hell of a ride...

Moneyswirth's picture

Of course this will get worse.  Do we honestly believe everyone will be paying cash for the new iPad 3?  Get real...

DormRoom's picture

the entire financial environment is like boiling a frog.  Those in the know, believe they can get out in time, given their access to information, and political structures,  while the rest of society doesn't even know how the Central Banks have put them in a pot.

battle axe's picture

Sure the US public is deleveraging, it is called walking away from your mortgage on your underwater house. 

francis_sawyer's picture

Might as well just juxtapose the chart line against what the Treasury heaps on the public debt... I'd guess it matches dollar for dollar (minus the cut that the banks get to convert into raw materials & PM's)...


dolly madison's picture

Yes, and walking away from credit cards.  It's a good thing for breaking the machine,

SheepDog-One's picture

Pfffft...whatever....just print $300 million dollars, send checks out to every american, everyone in america a millionaire. Problem solved. Where do I pick up my Nobel prize in economics?

Problem Is's picture

Barry Soetoro has an extra Nobel peace prize he isn't using...

TigerTrail's picture

All Negative news is "Bullish"


Relentless Rally in Dow Continues.......

SheepDog-One's picture

Yea. Well, until it suddenly isnt, then everyone sits stunned wondering what happened since new highs were so guaranteed thru this year.

bdc63's picture

Not to worry ... Uncle Benny stands ready to push the print button at a moments notice ...

SheepDog-One's picture

Well thats what they want everyone to think anyway, that markets will never go down again. They can buy it all they like, Im not near that stupid.

pacu44's picture

He never stopped printing... Just sitting on the warehouse floor ready for shipment...

Ben doesnt know how to stop printing, he is testing his release theory(z)

Problem Is's picture

The Bernank's Nightmare

Cue-bald Bennie wakes up at 4am every morning with his lip quivering and beads of sweat on his bare cranial...

Dreaming his printer's Bernanke Buck Green ink cartridge just ran dry...

eddiebe's picture

?Whatever. Bernie wakes up, has a cup of the best coffee FRN's can buy on his all paid for platinum card issued by JPM, smiles at himself in the mirror and then goes down in the basement, opens his vault and admires his stack of gold kilo bars.

 Ahhhh, that's the way.

Confused's picture

Do demons really need sleep?

Eally Ucked's picture

It looks to me that the whole deleveraging occurs in mortgage area. So suddenly Americans started to overpay their mortgages? Or maybe they got chased out from their houses by the banks?

MachoMan's picture

It isn't that banks aren't trying to work through their shadow inventory, it's just that they can't all at once.  As a result, the banks that are "on the ball" are trickling through the losses as they get NSF and other bullshit fees to compensate.

TigerTrail's picture

Remember the Algorithms are based on "Human-Psychology"

TigerTrail's picture

Dow 14k in sight ?

SheepDog-One's picture

Only 10 more avg trading days left until previous insane mega-bubble market tops are blasted thru! 

Except last time DOW was at 14,000, a barrel of oil cost $30. This bubble pop is going to be very nasty. Everyone all-in on this one will be devastated for life.


resurger's picture


is this any good?

ProShares Trust Ultra VIX Short (UVXY);r...

I want to load up?

Problem Is's picture

If it keeps going up your trades will be cancelled in the next flash crash...

Jamie & The Corz will officially vaporize your account...

resurger's picture

Cant eliminate that possibility problem

In the next flash crash lots of people accounts will be vaporized, especially the Bulls.

Village Smithy's picture

There are a lot of people out there who haven't hedged in any way and think they are just going to get out when the market turns. I wish them luck.  The PPT is going to be overwelmed.