When I make presentations, I use a chart showing the long term ratio of (all US, private and public) Debt to GDP. The chart above is a variation of that.
The CHART OF THE DAY shows U.S. total debt and gross domestic product since 1952, along with the ratio between them, based on data compiled by Bloomberg. The ratio rose in the first quarter to 372 percent even as household borrowing dropped for a second straight quarter, an unprecedented streak.
The U.S. is headed for “a deleveraging period” in which the amount of so-called private debt, including consumer borrowing, collapses as government borrowing explodes, Comstock wrote.
Assuming that private borrowers pay down debt at the same pace as they did in Japan after its 1980s economic bubble burst, the savings rate will climb to about 10 percent in 2018, the report said. The estimate was made in a study by the Federal Reserve Bank of San Francisco that Comstock cited. It’s more than double the 4.6 percent rate for June.
Comstocks suggest the U.S. economy may be entering into a lost decade like Japan’s economy. Comstock Partners they expect a 20 period of substandard performance.
My fear is that zombie banks can turn us Japanese, but 20 lost years? Sheesh, I shudder to think about it.
Lost Couple of Decades’ Looming for U.S. Economy: Chart of Day
Bloomberg, August 7 2009
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