Consumer Debt

debts of consumers

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Increasing net wealth of US households and lower indebtedness in relation to incomes conceal strong imbalances. "For the lower part of the incomes breakdown, the balances have become more fragile," says Deutsche Bank. In all parts of the distributive system, the net -to-income value has fallen, with the exception of the richest 10%.

In a recent memo, the Deutsche Banks economics team tried to fight with this topic. You find that things look fine overall - budgets earn enough to repay the debt, which now amounts to 12.84 trillion dollars - about two-thirds of GDP. However, this overall view is distorted by the boom in rich people's income, and "below the ground, emerging fissures may form," say the bank's bankers.

"A number of measurements of revenue expansion have decelerated; the savings to GDP ratios have dropped to almost all-time lows; consumer loan demands and loan expansion measurements have declined and balances have become more vulnerable to the lower part of the revenue mix. Indeed, the average net value to household incomes ratios have declined since the economic downturn, the German said.

But " is striking that all parts of the revenue breakdown have fallen their net asset-to-earnings relations with the exception of the top 10%, suggesting that the aforementioned records of high asset-to-earnings relations are mainly pushed by the top part of the revenue breakdown," say the bank's economics. "Although most budgets are cutting their debt burden, they may be in a more vulnerable position as they have been losing more of their cushion holdings of wealth.

" A further way to visualise the US economy is to look at the relationship between budget debt and wealth. - Since 2007, the overall budget average has recorded only a small rise in indebtedness, from 0.3 to 0.36. The average of the budget's total debt has been reduced to 0.3 per cent. - The bottom of the trough allocation has raised the levy quite drastically and rose by nearly 50% to 0.45 from 0.31.

  • The remainder of the spread recorded a much lower increase in leveraging or even complete deletion at the upper end. Deutsche Bank, however, does not believe that this lower level fragile situation is enough to compensate for the upper end of the latter's earnings, so that overall US consumer expenditure, which represents more than two-thirds of total business activities, will be stable, albeit not spectacular.

That means that the economy should be able to maintain its current rate of 2%. "Overall budget balances are sound. However, since these measurements are mainly mean (averages), they are distorted at the top end of the distributions of incomes and may not exactly mirror trends for a large part of the population," the Germans say.

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