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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: KyrosL who wrote (108103)6/11/2001 6:31:01 PM
From: Mark Adams   of 436258
 
First the more relevant ratio of consumer debt burden is debt service to disposable income, rather than total debt to disposable income. I believe this ratio is currently at or very near a record. This is because, as your graphs show, revolving (mostly credit card) debt has been rising sharply and interest rates for revolving debt are over two times interest rates for non-revolving debt (mostly car loans.) Moreover, while interest rates for non-revolving debt are affected by Fed interest rate reductions, interest rates for revolving debt are largely not affected.

Great Point!

Wait a minute. I found that the 'interest coverage ratio' for consumers had not grown substantially based on NIPA numbers. At which point I was informed "that's because interest rates are lower". God forbid official inflation comes back and interest rates go up. But then can credit cards charge >18-22%?

+ Interest payments have grown from 2.28% (94) to 3.03% (00) of disposable personal income, after falling from 2.7% (90) from Message 15543838

If we were to talk principle payments on debt being historically high rather than interest- then I'd suspect churn as revolving balances are paid off monthly more frequently now than prior years.

Regarding the leasing- I understand it is included. Check federalreserve.gov for more details.

I also thought mortgages were included- you'll see in the above link that the fastest growing form of credit is "Pools of securitized assets". But I could be wrong.
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