Interesting chart that Macro Market Musings calls “The Revenge of the Balance Sheets.”
Each of our double peak in assets — dot com stocks and housing — sent the ratio to unsustainable levels and back again.
You may recall at each of these peaks, some idiot was invariably trotted out to discuss how the debt to asset ratio was very favorable, so there was nothing to worry about (move along!). Of course, to reach this conclusion, they had to ignore the simple fact that assets fluctuate in value, but debt persists until it is paid off.
Here’s today’s chart:
Household Net Worth as Percentage of Disposable Personal Income
click for larger chart
Source: Macro and Other Market Musings