On numerous occasions in recent months we have remarked on the creditable progress that America has made in terms of deleveraging its once obese balance sheets. In that regard, it is worth drawing attention to a Bloomberg article on this very subject, which provides some fresh colour on how this deleveraging is proceeding.
According to Bloomberg:
Total US indebtedness (including government and the private sector) fell to 329% of GDP at the end of Q2, down from 359% four years ago.
Private sector borrowing has fallen by USD 4 trln from a peak of USD 40.2trln. Consumer debt fell to USD 11.2trln at the end of Q2, from a peak of USD 12.8trln in 2008.
Household wealth in the US rose to USD 62.7trln at the end of June, down from USD 51.2trln three years ago.
America is much further down the path of balance sheet-deleveraging than Europe and Asia.
Consumer debt obligations as a percentage of disposable income have fallen to a two-decade low. Notwithstanding the understandable concerns regarding the truly frightening scale of future debt obligations faced by the US government, the deleveraging witnessed in the broader US economy over recent years is commendable. Potentially this development augurs well for the dollar over the medium term.