Good News: Household Deleveraging Is Pretty Much Finished


Hale Stewart provides some reason today to be moderately bullish on the economy: the massive deleveraging that started when the recession hit has now pretty much run its course:

What started this recession was a massive build-up of debt in the system, largely related to the housing bubble. When the bubble burst, people had to sell the asset(s) underlying their debt, usually at a loss….This meant they had less money to spend on other items, meaning there was overall less economic demand, culminating in weak overall growth.

….Total household and non-profit debt, according to the Federal Reserve’s Flow of Funds report, has been dropping since a little bit before the recession began….Total household debt has been declining as a percentage of GDP since mid-way through the last recession….Household obligations as a percent of disposable personal income are at very low historical levels.

….Put in economic terms, the above charts show the “balance sheet” recession is close to ending.

There are still some underlying structural weaknesses in the economy that should keep anyone from getting too excited: employment is weak; wages are stagnant; automation is starting to become a real threat; deleveraging still has a ways to go overseas; and income inequality is back on the rise. Still, leverage was the core reason the 2008 recession was so severe and the subsequent recovery was so weak. The fact that household leverage is back to its historical average is good news for the future.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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