September 6, 2013

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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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

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