by David Stockman
David Stockman’s Contra Corner
For a time this artificial goosing of living standards by the central bank money printers did help insulate Flyover America from feeling the full brunt of its shrinking job opportunities and the deflating purchasing power of its pay checks. What it couldn’t afford, it borrowed.
No more. As is evident in the chart below, the household LBO is over and done. After peaking at 225% of wage and salary income in 2007, the household leverage ratio has retracted to about 180%.
Yet that modest decline does not mean American households are out of the woods; the household leverage ratio is still more than double the 75%-85% level that pre-dated the Greenspan era and remains far above pre-1980 levels that had been consistent with healthy and sustainable household finances.