Good Economic News–More Deleveraging

The Federal Reserve’s Flow of Funds report reveals more deleveraging, with U.S. debt growing at the slowest pace on record and nearly offsetting the huge rise in federal debt. Nonfinancial debt increased at just 1.6% annually, to $34.7Trillion.


Household debt contracted at an annual rate of 1¼ percent in the fourth quarter, its seventh consecutivequarter of decline.

You can check the full document out here (pdf and a long one).


Posted in * Economics, Politics, Consumer/consumer spending, Economy, The September 2008 Proposed Henry Paulson 700 Billion Bailout Package

4 comments on “Good Economic News–More Deleveraging

  1. Knapsack says:

    I know the economists will contradict me, but that household debt decline number certainly qualifies as a silver lining in a very, very ominous stormcloud that is still hanging over us.

  2. RomeAnglican says:

    Not sure this qualifies as “good” economic news in the midst of a severe recession. Personal debt is down because money is not being spent, because people can’t get credit, and because people (prudently) are securing their financial positions because they are not confident about the future. Perhaps in any other context this would count as good, but now it’s a sign of how grim things really are.

  3. New Reformation Advocate says:


    You may well be right, but IMHO it’s still movement in the right direction. Reducing personal debt levels is crucial to the wellbeing of countless American families and individuals. And modest as a shrinkage of only 1.25% in personal debt is, I still welcome it.

    Proverbs 22:7 remains an important warning:

    [i]”The borrower is slave to the lender.”[/i]

    David Handy+

  4. Ad Orientem says:

    Re # 2
    In the short term you are correct. This is likely to slow the recovery. But in the long term this really is good news. You can not build an economy on debt, which is what we have been trying to do for the last 15 or more years. This false prosperity fueled by easy money and easier credit is in large part responsible for the dreadful bubble that recently burst.

    The current depression is the result of excessive spending and living beyond our means at every level of society. The only way to restore a true prosperity is to take the medicine that we must. We need to pay down our debts, live within our means and start saving again. We simply can not borrow and spend our way out of debt.

    But yes; in the near term this will be a bitter pill to swallow. Paying the bar tab after an all night bender usually is.