One of the tales you hear by those rationalizing that the U.S. economy is turning around, it that the consumer is bearing down and paying down debt. This, the argument goes, augers well for the return of sanity.
As the Wall Street Journal notes, this isn't what is actually happening at all. The reality is that over the past two years, consumers have not been deleveraging as a voluntary act of eliminating debt, but have been actually aggressively leveraging more and more until the bank providing them credit puts them into involuntary bankruptcy, cutting off the money flow.
The data outlined by the WSJ confirms that of the over $600 billion in deleveraging that has occurred, only $20 billion or so of it was voluntary. Irresponsible borrowing practices, in which US consumers spend, spend, spend themselves into oblivion, accounts for the balance.
http://blogs.wsj.com/economics/2010...defaults-account-for-most-of-pared-down-debt/
As the Wall Street Journal notes, this isn't what is actually happening at all. The reality is that over the past two years, consumers have not been deleveraging as a voluntary act of eliminating debt, but have been actually aggressively leveraging more and more until the bank providing them credit puts them into involuntary bankruptcy, cutting off the money flow.
The data outlined by the WSJ confirms that of the over $600 billion in deleveraging that has occurred, only $20 billion or so of it was voluntary. Irresponsible borrowing practices, in which US consumers spend, spend, spend themselves into oblivion, accounts for the balance.
http://blogs.wsj.com/economics/2010...defaults-account-for-most-of-pared-down-debt/
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