Consumer debt levels in the US offer clues to banks’ strategy
This chart is from the US Federal Reserve – December 9, 2010 – Statistical Release – Z.1 Flow of Funds. www.federalreserve.gov/releases/z1/Current/z1.pdf.
What leaps off the page is that consumers knew something was wrong back in 2006. During that year households were already borrowing at a slightly slower rate yet it was not until Sept 2008 that Banks clued in following the Lehman Brothers bankruptcy. It is also interesting that businesses were borrowing more that same year, 2006.
Anyhow even more dramatic is the net reduction in debt that began in Q1 2009, and continues. However the Q3 2010 number hints that people are already reducing at a slower pace. When we look at the size of increases in the 2002 – 2006 range, all double digit, there is a long way to go to any kind of real de-leveraging that would be necessary to set consumers (and banks asset portfolios) up for what comes next.
