Daniel Indivglio is alarmed at consumer debt in the United States

consumer debt per capita 2010-07 indiviglio.png

This chart should be startling. It shows that total debt has increased from around $1,186 per person in 1948 to $10,168 in 2010. And remember, that’s using 2010 dollars — and it doesn’t include real estate debt either like mortgages or home equity loans. This debt includes credit cards, auto loans, student loans, personal loans, and other non-real estate consumer debt.

Perhaps an even more interesting observation is the rise of credit card debt. They account for most of the “revolving” debt shown with the green line. It was virtually non-existent until 1970. Now Americans average $3,480 in credit card debt per capita. Since just 1980, that’s an increase of 285%.

Daniel is charting real per-capita consumer debt and its growing out of control!

Which reminded me of another real per-capita stat that is growing out control: personal disposable income.

So I decided to see how the debt compared to disposable personal income.


When we take out Credit Cards (revolving debt) consumer debt per disposable dollar has actually fallen. That’s what we would expect if credit cards were a substitute for other forms of credit.

The consumer debt-to-income ratio has risen when credit cards are included. However, I must wonder how much of that is credit cards replacing informal lending channels. If you can borrow from VISA at 9% APR then that might be better than borrowing from Mom and Dad and paying the implicit and nearly infinite APR of weekly scoldings and endless guilt.

However, there is a more fundamental question – can this go on forever? Can we pile more debt on top of more debt. Yep, we sure can. There is no limit.

To prove this I am offering to loan one of my co-bloggers (either can take up the offer) $100 every millisecond on the millisecond. All I ask in return is that they loan me $100 every millisecond on the millisecond.

By my count we should be able to rack-up, between the two of us, about $6.3 Trillion in debt by the end of the year. Of course, we’ll also rack up about $6.3 Trillion in assets. Each loan is a debt to the borrower and an asset to the lender. On net we’ll be no richer and no poorer. That’s why its important to look at the balance sheet. How much of what you got is owed to someone else?

Lets look at America’s balance sheet. We’ll compare consumer credit to total assets.


We see a rise through the sixties but we can’t see the effect of credit cards at all. The mean has been roughly the same since 1966.

That could mean that we’re borrowing heavily on our credit cards as we see our 401(k)s rise. I doubt that though.

I suspect it means credit cards are replacing informal channels. That loan from Mom and Dad didn’t show up as a household liability in 1965, but it didn’t show up as a household asset either.

In truth, it was both. It was your liability and Mom’s asset. When formal channels replaced informal channels recorded liabilities rose, but so did recorded assets. Of course this also applies to shall we say, less loving-parent more break-your-legs-if-you-don’t-pay type of debt markets.

I do notice, however, that there are two nasty spikes just recently. Is that America growing deep in debt just before the dot-com and housing bubble crashes?

Actually, it looks like just the opposite. Its Americans suddenly seeing their balance sheets deteriorate as a result of the dot-com and housing bubbles bursting.


There is a lot more data where this came from. In particular just from glancing, we can see a much stronger trend in mortgages. However, consumer credit doesn’t look like its raging out of control.