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Is the volume of personal credit not absolutely exploding right now because of the real estate boom? Maybe I misread the entire paper - but it seemed that the

Is the volume of personal credit not absolutely exploding right now because of the real estate boom? Maybe I misread the entire paper - but it seemed that the premise was low interest rates are correlated with or cause low volume of credit. My understanding is that government, personal, and business debt have all grown at one of the fastest paces in history. Am I just completely wrong? Did I misread this post entirely?

iso1210 5y ago
US household debt as percentage of GDP looks down https://www.statista.com/statistics/248283/household-debt-ratio-to-gdp-in-the-united-states/ https://www.statista.com/statistics/248283/household-debt-ra...
- onlyrealcuzzo 5y ago
  According to your source, it's above where it was pre-pandemic. And mid-pandemic, when interest rates were arguably the lowest, is when it peaked at 85%. FRED is a better source: https://fred.stlouisfed.org/series/HDTGPDUSQ163N https://fred.stlouisfed.org/series/HDTGPDUSQ163N It even has a chart [= I guess to the author's point - HH debt to GDP was much higher before 2008 when interest rates were much higher. However, lowering interest rates recently coincided with a DRAMATIC increase HH debt (the largest jump on the chart by far).
  - iso1210 5y ago
    The pandemic isn't over, yet the direction of debt is downwards. If you take the rate of change, I guess it slowed its descent about 2015, which happens to be when rates were increased from 0.25%. Seems that increasing rates causes the rate-of-change of debt to increase But that's by the point. Your claim was > Is the volume of personal credit not absolutely exploding right now because of the real estate boom? Well not according to the graphs you provided. Q2 2021 debt was 77.7%, down 0.9pp on Q1 2021.
mym1990 5y ago
A record number of home buyers are paying cash as well, 25% at peak last year. There is also a lot of fintech buying that was going on.
imtringued 5y ago
https://scholar.harvard.edu/files/straub/files/mss_richsavingglut.pdf https://scholar.harvard.edu/files/straub/files/mss_richsavin... The boring reality is that "savers" can keep their money in demand deposits and never spend them and they do this because the spread between the lowest deposit rate (0% because of cash) and interest paid on long term deposits is below their liquidity preference. This forces companies and consumers to borrow new money back into the economy to keep the money that is actually circulating at the same level. Since nobody actually wants to take on more loans, interest rates keep dropping.

iso1210 5y ago

US household debt as percentage of GDP looks down https://www.statista.com/statistics/248283/household-debt-ratio-to-gdp-in-the-united-states/ https://www.statista.com/statistics/248283/household-debt-ra...

onlyrealcuzzo 5y ago
According to your source, it's above where it was pre-pandemic. And mid-pandemic, when interest rates were arguably the lowest, is when it peaked at 85%. FRED is a better source: https://fred.stlouisfed.org/series/HDTGPDUSQ163N https://fred.stlouisfed.org/series/HDTGPDUSQ163N It even has a chart [= I guess to the author's point - HH debt to GDP was much higher before 2008 when interest rates were much higher. However, lowering interest rates recently coincided with a DRAMATIC increase HH debt (the largest jump on the chart by far).
- iso1210 5y ago
  The pandemic isn't over, yet the direction of debt is downwards. If you take the rate of change, I guess it slowed its descent about 2015, which happens to be when rates were increased from 0.25%. Seems that increasing rates causes the rate-of-change of debt to increase But that's by the point. Your claim was > Is the volume of personal credit not absolutely exploding right now because of the real estate boom? Well not according to the graphs you provided. Q2 2021 debt was 77.7%, down 0.9pp on Q1 2021.

mym1990 5y ago

A record number of home buyers are paying cash as well, 25% at peak last year. There is also a lot of fintech buying that was going on.

imtringued 5y ago

https://scholar.harvard.edu/files/straub/files/mss_richsavingglut.pdf https://scholar.harvard.edu/files/straub/files/mss_richsavin... The boring reality is that "savers" can keep their money in demand deposits and never spend them and they do this because the spread between the lowest deposit rate (0% because of cash) and interest paid on long term deposits is below their liquidity preference. This forces companies and consumers to borrow new money back into the economy to keep the money that is actually circulating at the same level. Since nobody actually wants to take on more loans, interest rates keep dropping.