Opinion

Felix Salmon

The economic statistic of the decade

By Felix Salmon
December 31, 2009

Mike Mandel has four nominees for his “Economic Statistic of the Decade” award, including home prices (obvs), Chinese growth, and global trade. But the most startling one, for me, is US household borrowing:

borrowing.png

I like the time frame that Mike has chosen here, since it shows not only the huge increase in borrowing during the credit boom and the stomach-churning plunge thereafter, but also, for much of the 1990s, what “normal” should look like.

Mike notes that the data for this chart includes domestic hedge funds, so it shouldn’t be taken entirely at face value. But it’s the best visual representation I’ve seen of the credit boom and bust.

Comments
9 comments so far | RSS Comments RSS

Why talk about the decade now?

There’s one full year remaining in the current decade.

Posted by MarkWolfinger | Report as abusive
 

There is one full year remaining in the decade that consists of the first ten years of the 21st century. There are no more years remaining in the decade that consists of the ten years beginning with 2-0-0. Each of them is “the current decade” (as is the decade that consists of the years 2007 through 2016). It turns out that the overwhelming majority of the population finds it most appealing to review the history of a decade defined as the set of years with the same three initial digits, and they are in no way wrong to do so.

Posted by mattm | Report as abusive
 

You know what is amazing is the growth in China! The Chinese government has been buying aluminum and copper like no tomorrow! See the full report here: http://eafepro.com/content/chinese-growt h-story-heading-bubble

The question remains is why is the Chinese buying when their demand is at a low?

Posted by EAFEPro | Report as abusive
 

Is this the derivative of “Total Household Debt”?…

Posted by MattF | Report as abusive
 

I think that the borrowing drop is significant. I think that we might be seeing that wealth means having things that are not financed. I believe that we will see a new generation of cash customers. Buying commodities are just like buying collector cars. You have to have too many before you quit buying.

Posted by fred5407 | Report as abusive
 

If hedge funds are a large component of “Household Borrowing”, this chart tells a very different story about what’s been happening over the last decade — financial speculation via cheap money vs. excess personal borrowing by strapped households. Quite different implications….It seems important to know the hedge fund component.

Posted by maynardGkeynes | Report as abusive
 

The uptick coincided with the influx of recycled dollars from the exporting and oil producing countries. The savings glut kept global interest rates low. American borrowing/spending is quite elastic with respect to interest rates (obviously), while that of, say, the Germans, is not.

Posted by Mega | Report as abusive
 

My favorite graph is the one that shows the rise in mortgages broken into categories because then you see the massive increase driven by securitization – as opposed to the GOP blaming Fannie/Freddie. The numbers are simply huge.

Posted by jomiku | Report as abusive
 

from Robert Pozen on How to restore confidence in loan securitisation http://www.ft.com/cms/s/0/f45e6dbc-e8af- 11de-9c1f-00144feab49a.html – “In 2006, before the financial crisis, banks accounted for less than 25 per cent of all credit extended in the US; most loans were originated by non-bank lenders such as auto finance companies, credit card issuers and insurance companies. These non-bank lenders depend heavily on loan securitisation… In 2006, the US volume of loan securitisation was $100bn per month; in 2009, this volume is averaging less than $5bn per month.”

there’s your (‘wile e. coyote’ over the edge) collapse; it’s not that banks aren’t lending so much as median income is falling… http://online.wsj.com/public/resources/i mages/P1-AL265_COMPAR_20080420183003.gif

Posted by loph4t | Report as abusive
 

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