21 Jan 2014
Flash: US debt has doubled since 2008! - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that since the 2008 crisis, US debt levels have doubled.
Key Quotes
"The detail behind the US debt levels shows what has been happening to various parts of the US economy. US government debt didn't really grow dramatically as a share of GDP between 1960 and 2008. Since then it has almost doubled."
"This makes sense - a Federal debt/GDP ratio that climbs when the economy ‘needs' help and falls back when growth is strong. But private sector debt levels are about twice what they were in 1960. Sure, the household sector's debt ratio has come back down sharply from the 2009 peak, but that came after an astonishing acceleration between 2001 and 2009. And the corporate sector has simply, quietly, increased leverage."
"Looking at more recent trends, Federal debt growth is slowing, and household debt is growing more slowly than GDP so the debt/GDP ratio is falling, but debt is increasing in absolute terms. This is good news for the US economy -if households, companies and the government are happy to borrow more, that will boost growth."
"There is still every reason to hope for above-consensus growth in 2014. But the US economy needs to keep debt-service costs low and nominal GDP growth high relative to interest rates if it is to break the cycle of higher peaks in the debt/GDP ratio."
Key Quotes
"The detail behind the US debt levels shows what has been happening to various parts of the US economy. US government debt didn't really grow dramatically as a share of GDP between 1960 and 2008. Since then it has almost doubled."
"This makes sense - a Federal debt/GDP ratio that climbs when the economy ‘needs' help and falls back when growth is strong. But private sector debt levels are about twice what they were in 1960. Sure, the household sector's debt ratio has come back down sharply from the 2009 peak, but that came after an astonishing acceleration between 2001 and 2009. And the corporate sector has simply, quietly, increased leverage."
"Looking at more recent trends, Federal debt growth is slowing, and household debt is growing more slowly than GDP so the debt/GDP ratio is falling, but debt is increasing in absolute terms. This is good news for the US economy -if households, companies and the government are happy to borrow more, that will boost growth."
"There is still every reason to hope for above-consensus growth in 2014. But the US economy needs to keep debt-service costs low and nominal GDP growth high relative to interest rates if it is to break the cycle of higher peaks in the debt/GDP ratio."