In the previous post I showed household debt as a portion of total private non-financial debt. About half, but it varies, and it varied higher on the approach to crisis. Back in the normal range now, high, but high in the normal range and trending down.
I highlighted two peaks that look similar. They show similar rates of increase on the approach to peak. They show similar rates of decrease on the decline from peak -- and faster decline than increase for both.
In addition, they both peak near 0.54 on the vertical scale. And they both occur during times of superior economic performance. I'm not saying anything about cause or effect or significance; it's far too soon for that. I'm just pointing out similarities.
|Graph #1: Household Debt relative to Total Private Non-Financial Debt|
highlighting similarity between the 1960s and the 1990s
So I thought I'd take a look at all three peaks. I started out by bring the FRED data -- the "total credit to private non-financial sector" series is copyright BIS (but FRED is down again so I can't get their preferred copyright claim) -- bringing it into Excel and using Kurt Annen's Hodrick-Prescott code to smooth out the jiggies:
|Graph #2: Ratio of Household Debt to Total Private Non-Financial|
Debt (blue) and the Hodrick-Prescott Trend (red)
Those peaks occur at 1964Q2, 1979Q4, and 1996Q3. Each red subset shows the peak, 16 quarters before the peak, and 10 quarters after.
|Graph #3: Household-to-TPNF Debt, and Three Similar Subsets|
The red line is the 1979Q4 peak. It shows the same general shape as the blue and green. But the red is significantly lower, just as the October 1979 peak is lower on Graph #3.
|Graph#4: The Subsets Highlighted on Graph #3|
Blue=1964 peak, Red=1979 peak, Green=1996 peak
I'll say it again: The blue and green lines, 30 years apart chronologically, are remarkably, remarkably close as a portion of total private non-financial debt. I'm not saying anything about cause or effect. But maybe there is something to be said for significance.