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Nominal numbers aren't very meaningful. This number is affected by inflation just like prices. Household debt relative to GDP has been dropping pretty consisten

by tootie 3y ago

Nominal numbers aren't very meaningful. This number is affected by inflation just like prices. Household debt relative to GDP has been dropping pretty consistently since the financial crisis: https://fred.stlouisfed.org/graph/?g=17HqN https://fred.stlouisfed.org/graph/?g=17HqN

missedthecue 3y ago
Wow that's surprising given that new cars and houses are so much more pricey these days. I guess the average person is earning a lot more than in 2008.
- lockhouse 3y ago
  Real wages adjusted for inflation are up since 2008, but sharply down since 2020. https://fred.stlouisfed.org/series/LEU0252881600A https://fred.stlouisfed.org/series/LEU0252881600A
- tylerfontaine 3y ago
  Or homeownership is being consolidated away from the average person, thus not being included in debt.
- latchkey 3y ago
  We are now in a world where UPS drivers have to make $170k a year to live.
  - missedthecue 3y ago
    That's 3x median income in one of the highest earning countries on earth. UPS drivers are paid well, but I don't think that's the minimum needed "to live".
- wyre 3y ago
  Isn’t GDP heavily correlated with the average person’s earnings? My guess is that that post-financial crises the banks made it harder to give out loans which would decrease the amount of household debt over time as more households get declined on loans.
- medvezhenok 3y ago
  Lots of people refinanced at a low rate in 2021 (at pre-2021 prices) and are not buying new cars... those people are doing just fine. Given the fact that the housing market is frozen, there's a lot more of them than there are people who bought in the last couple of years. This drags the average down. There's a bifurcation, with some people (mostly homeowners who owned pre-2020) getting a giant handout from the government (record low interest rates, ability to refinance, etc - due to the FED buying mortgage backed securities en masse), and the rest of the people getting shafted.
lockhouse 3y ago
Currently it’s affected a lot by interest rates. It’s very difficult to pay back a credit card that jumped up to a 29.99% APR.
maerF0x0 3y ago
Does that debt include buy now pay laters like affirm / klarna?
- tootie 3y ago
  Those probably have a tiny percentage of total debt. The biggest will be credit cards, mortgages, auto loans, home equity. I'm not really sure how it's calculated, but maybe based on the value of the secondary markets like how much investable consumer debt is being issued by major lenders. Assuming that pay-laters have a real financial institution behind them, they'd probably be part of the calculation.
autokad 3y ago
I think GDP may not be the best representation to how well people are doing, but debt as a % of personal income seems to tell the same story: https://fred.stlouisfed.org/series/TDSP https://fred.stlouisfed.org/series/TDSP Its a bit surprising given observational evidence. right now people seem to be spending at any cost and have run dry. now we are to the point every other weekend the bars/pubs are empty because people already spent their money, and the next week its packed because they got paid.
- skybrian 3y ago
  That looks to me like personal debt is almost where it was before the pandemic? Slightly lower, but will it last? But that nearly straight line at 10% after 2008 is interesting. It seems like there must have been a big change in behavior?
- tootie 3y ago
  It's not really meant to correlate tightly to personal wealth, but it's a proxy for inflation and at least loosely correlated with personal wealth.
theseadroid 3y ago
Now that prices are up and salaries are somehow up, but (income) tax rates stay the same. Does that mean the government are taxing more for all of us?
- alex_young 3y ago
  Hmm. Seems like if everything costs more, and you get paid more, the things the government purchases probably cost more too, so the tax rate should be the same right?
- HWR_14 3y ago
  Tax brackets and standard deductions are indexed to inflation.
nabla9 3y ago
Great point. Here are two even better charts relevant to the subject: [Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks]/GDP https://fred.stlouisfed.org/graph/?g=17Hsu https://fred.stlouisfed.org/graph/?g=17Hsu [Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks]/ ([Total Households] * [Real Median Household Income in the United States]) https://fred.stlouisfed.org/graph/?g=17Hsf https://fred.stlouisfed.org/graph/?g=17Hsf (units adjusted) Consumer loans jumped after financial crisis and peaked 2018.

by tootie 3y ago

missedthecue 3y ago

Wow that's surprising given that new cars and houses are so much more pricey these days. I guess the average person is earning a lot more than in 2008.

lockhouse 3y ago
Real wages adjusted for inflation are up since 2008, but sharply down since 2020. https://fred.stlouisfed.org/series/LEU0252881600A https://fred.stlouisfed.org/series/LEU0252881600A
tylerfontaine 3y ago
Or homeownership is being consolidated away from the average person, thus not being included in debt.
latchkey 3y ago
We are now in a world where UPS drivers have to make $170k a year to live.
- missedthecue 3y ago
  That's 3x median income in one of the highest earning countries on earth. UPS drivers are paid well, but I don't think that's the minimum needed "to live".
wyre 3y ago
Isn’t GDP heavily correlated with the average person’s earnings? My guess is that that post-financial crises the banks made it harder to give out loans which would decrease the amount of household debt over time as more households get declined on loans.
medvezhenok 3y ago
Lots of people refinanced at a low rate in 2021 (at pre-2021 prices) and are not buying new cars... those people are doing just fine. Given the fact that the housing market is frozen, there's a lot more of them than there are people who bought in the last couple of years. This drags the average down. There's a bifurcation, with some people (mostly homeowners who owned pre-2020) getting a giant handout from the government (record low interest rates, ability to refinance, etc - due to the FED buying mortgage backed securities en masse), and the rest of the people getting shafted.

lockhouse 3y ago

Currently it’s affected a lot by interest rates. It’s very difficult to pay back a credit card that jumped up to a 29.99% APR.

maerF0x0 3y ago

Does that debt include buy now pay laters like affirm / klarna?

tootie 3y ago
Those probably have a tiny percentage of total debt. The biggest will be credit cards, mortgages, auto loans, home equity. I'm not really sure how it's calculated, but maybe based on the value of the secondary markets like how much investable consumer debt is being issued by major lenders. Assuming that pay-laters have a real financial institution behind them, they'd probably be part of the calculation.

autokad 3y ago

I think GDP may not be the best representation to how well people are doing, but debt as a % of personal income seems to tell the same story: https://fred.stlouisfed.org/series/TDSP https://fred.stlouisfed.org/series/TDSP Its a bit surprising given observational evidence. right now people seem to be spending at any cost and have run dry. now we are to the point every other weekend the bars/pubs are empty because people already spent their money, and the next week its packed because they got paid.

skybrian 3y ago
That looks to me like personal debt is almost where it was before the pandemic? Slightly lower, but will it last? But that nearly straight line at 10% after 2008 is interesting. It seems like there must have been a big change in behavior?
tootie 3y ago
It's not really meant to correlate tightly to personal wealth, but it's a proxy for inflation and at least loosely correlated with personal wealth.

theseadroid 3y ago

Now that prices are up and salaries are somehow up, but (income) tax rates stay the same. Does that mean the government are taxing more for all of us?

alex_young 3y ago
Hmm. Seems like if everything costs more, and you get paid more, the things the government purchases probably cost more too, so the tax rate should be the same right?
HWR_14 3y ago
Tax brackets and standard deductions are indexed to inflation.

nabla9 3y ago

Great point. Here are two even better charts relevant to the subject: [Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks]/GDP https://fred.stlouisfed.org/graph/?g=17Hsu https://fred.stlouisfed.org/graph/?g=17Hsu [Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks]/ ([Total Households] * [Real Median Household Income in the United States]) https://fred.stlouisfed.org/graph/?g=17Hsf https://fred.stlouisfed.org/graph/?g=17Hsf (units adjusted) Consumer loans jumped after financial crisis and peaked 2018.