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Consumers continue to deleverage




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....

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