makloda, you can't look at household net worth as if it were a single giant household paying down a $950 billion dollar credit card bill with assets of $55 trillion. Credit card debt is concentrated at the low end of the income range, relative to net worth which is obviously concentrated at the upper end. Warren Buffet isn't worried about his credit card bill, but lots of typical American families are. Martin
FYI: The savings rate for American households was NEGATIVE for the entire year in 2006 ( -1.0% ) , but that metric was not a predictor of an economic downturn.
Good point. There is 951B of credit card debt. Then there is 1.1T of Home equity debt. http://www.nytimes.com/2008/03/27/business/27loan.html?bl&ex=1207195200&en=6c5820421533c024&ei=5087 The distribution of the debt is very important. As the wealthiest 5% of society doesn't have to worry much (and they own 85% of the assets or something like that, right?), the 2T of debt is mostly on those who only own 5-15% of the net assets. There is a total of 9.65T of home equity wealth out there. So one can only assume all other savings are in stocks, cash, capital markets, etc of about 35-45T at most, but distributed mostly to the wealthiest 5%. http://www.signonsandiego.com/news/business/20080306-0926-homeequity.html Unfortunately, GDP and consumption requires the masses do the buying and production, not the upper 5%. So lets say the bottom 85% own 15% of the assets in society (picked out of my ass, someone please find the real #s to make this argument more relevant). 15% of 50T (total assets) is 7.5T. If they owe a net total of 1.5-2T, then we are talking about a more threatening 20%-25% debt to assets ratio amongst the middle to lower class (85% of the population). And those people drive the economy. So its not entirely dismissable. Avg personal assets amongst all US citizens with the US debt cancelled out is something like 80-100K per person, I think. If wealth were evenly distributed, then the game is very different and this would be no big deal.