US Household Debt Surpasses 2008 High
An alternative view, and one I happen to subscribe to: a balance sheet analysis shows that US debt <i>must</i> go up over time to support exogenous capital flows.<p>Whether US debt grows in the housing sector, student loans, revolving debt, etc is a function of internal, domestic dynamics (including laws, local economic structure, etc). But the total capital flow into the US exceeds the outflow; that money ends up on a balance sheet somewhere.<p>It&#x27;s sort of the flipside to our conventional notion of trade balance, that the capital account must be equal and opposite. The difference is that capital flows are now 4-5x what&#x27;s necessary to account for trade, so it&#x27;s really capital movements wagging the trade dog.<p>The net effect of inbound capital flow into the US is people must consume more than they produce, to absorb the additional capital. That is debt. And that debt ends up somewhere, either on the government&#x27;s balance sheet, in the corporate sector, or households.<p>Major hat tip to Michael Pettis for his work describing this. His writings are dense but very digestible (<a href="http:&#x2F;&#x2F;carnegieendowment.org&#x2F;chinafinancialmarkets&#x2F;" rel="nofollow">http:&#x2F;&#x2F;carnegieendowment.org&#x2F;chinafinancialmarkets&#x2F;</a>).<p>[edited a typo]