Buy now, pay later? It’s later.

August 19, 2009

Buy now, pay later was the mantra of U.S. consumers during a debt-fueled binge earlier this decade.

Banc of America Securities-Merrill Lynch economists think getting U.S. household debt-to-income back to the long-term trend will require eliminating $1.75 trillion in debt, assuming no change in disposable income. That will probably take years.

And that’s their more conservative forecast, just taking the ratio from its current level of 131 percent down to 115 percent. To get back to the average seen in the 1990s, $4.35 trillion in debt would have to be eliminated. 

 “Either way you look at it, U.S.  households will remain mired in a period of balance sheet repair,” the economists wrote in a note to clients. “And, the continued debt elimination necessary to reach a more sustainable household balance sheet means that the ability of the U.S. consumer to lead the recovery on a sustained basis will be limited. This is why we do not expect the consumer to lead the economy out of the recession. This is also one of the risks to the view that th U.S. economy is on the verge of a V-shaped recovery.”

3 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

On the plus side, this can be an oppurtunity for young citizens who haven’t accrued a pile of debt (yet) to move up and become leaders before they’d otherwise have a chance to.

Posted by drewbie | Report as abusive

Now is the time more then ever for anyone with debt to buckle down and eliminate their debts. Debt elimination will be the key to the economy becoming stronger and this can be done in a reasonable time frame if handled properly. With this lesson the hope will be that we do not repeat ths issue we are currently having and learn to live with in our means, not being so reliant on credit.

Posted by George | Report as abusive

Now is the time more than ever for anyone with Debt to go Bankrupt! Do you realty think the goverment will ever pay off it’s debt? lol. Dont be a sucker! remember when you no longer have anything to loose there power over you is gone!

Posted by Dave | Report as abusive