13 February 2009
The Great Deleveraging in two Graphs
Consumers have begun the long and arduous process of deleveraging their balance sheets and this shift in behavior can be seen in the figures below. For the first time since the post-World War II era, U.S. households have truly deleveraged as the total debt growth has turned negative, not just decelerated. Households are beginning to reduce their debt levels much like they did during the Great Depression. Moreover, they are not only taking on less debt but they are consuming less, increasing their savings rate in the process.