Expanding debt: Dousing the flames with gasoline

By Colin Twiggs
March 15th, 2013 11:00 p.m. ET (2:00 p:m AET)

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We are now in the fifth year of recovery from the worst financial crisis in 50 years — fueled by expanding household debt, rising from 50% of GDP in the 1980s to close to 100% in 2008. Contraction since the GFC has brought US household debt back to 80% of GDP....

US Household Debt as % of GDP

But a worrying sign is that consumer debt has started to rise

US Consumer Debt as % of Disposable Income

And Steve Keen points out that margin debt is also rising, fueling the latest stock market rally.

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Holding interest rates at artificially low levels for an extended period risks fueling another credit bubble. The Fed/central bank needs to react quickly to expanding credit in any area of the economy. We all hope for a recovery, but it must be sustainable — with consumption fueled by rising employment rather than rising debt — and not another debt-fueled boom-then-bust.


For all the information schools impart, most are not very successful at raising students' IQs, but many schools are very good at making their students more disciplined. And self-discipline, it turns out, is the only way to get through life in one piece; it is the trait most consistently correlated with life success.

~ Glenn Kelman: What Victorians Got Right About Schools And Silicon Valley Has Wrong