Monday, November 28, 2011
According to the Fed, delinquency rates on consumer loans have fallen significantly since the last recession. This is a sure sign that consumers have been actively deleveraging, and that is good. The most recent reading on all consumer loans, 3.15%, is below the 3.5% average since this series began in 1987. The most recent reading on credit card delinquencies, 3.5%, is substantially below the 4.5% average since the series began in 1991. As I've noted before, this is also evidence that deleveraging does not destroy demand or otherwise necessarily weaken an economy. When a borrower pays down his debt, the lender must do something with the money received; either loan it to someone else or spend it on goods and services. Indeed, consumer deleveraging is a very normal part of a business cycle recovery, as this chart illustrates; it is not something to be feared.
HT: Mark Perry. And as he notes, if we could only get the U.S. government to demonstrate the same kind of financial responsibility as U.S. consumers have....
Posted by Scott Grannis at 8:55 AM