Since June 2008, the US household debt mountain has shown the seventh consecutive quarterly drop. This should be heartening. However it is not so for two reasons:
- The figure is down by a minuscule US$0.37 trillion, out of the US$ 13.9 trillion -- just 2.66% deleveraging in nearly two years. Not fast enough, when you consider that the bigger figure represents 131% of personal disposable incomes. Aamdani atthanni, kharcha 65 paise (Hindi proverb that translates into the second part of the headline of this blog entry) is the condition of the entire US population!
- Most of this reduction has been achieved by banks writing off mortgage and credit card defaults. If one adds back to the debt figure the amount of write-offs, the bad news is that US household debt has actually gone up slightly, by only US$ 186 Billion! No sign of de-leveraging. The spendthrift habits of two generations are obviously refusing to die away.