Another good perspective on the problem of private sector debt here via Barry Ritholtz’s Big Picture blog. The author shows us an alternative perspective on the continuing balance sheet problem in the consumer sector. The conclusion is similar to our own and shows more clearly how upside down the consumer balance sheet became (and still is):
“The trendline for Debt-to-Income is at about 114% which, absent rising Personal Disposable Income, implies a need to shed an additional $1.5 trillion in liabilities.”
This morning’s uptick in retail sales and the recent expansion in consumer credit has to start making one wonder if we’re not reflating the debt bubble all over again? A true economic expansion cannot be built on the back of unsustainable credit trends. Has all of this bailout mentality and lack of fiscal discipline resulted in a consumer who will become even more careless?
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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