Cecchini: U.S. Consumers in `Dire’ Credit Situation
Peter Cecchini, chief strategist at BGC Financial, talks to Pimm Fox about the U.S. economy and consumer credit on Bloomberg Television’s "Taking Stock." He says that the 122% percent household debt to GDP ratio is well above the pre-1980 average of 60-80%. Just to get back to a 100% to GDP ratio, we need an additional $2 trillion of deleveraging. In the absence of income growth, you just aren’t going to get these numbers down without deleveraging.
This is the major reason I have said that household deleveraging has just begun and that we will be in a balance sheet recession for the foreseeable future. Cecchini says the fake recovery has really been just a liquidity trade, one that has run out of steam. Could we be on the cusp of another more powerful liquidity trade? I think so. But more on that later in the week.
About Edward Harrison
- BBH CurrencyView: Risk Off Trade Back On, Euro In No Win Situation 14 May 2010
- UK consumers don’t save 14 Jul 2008
- Picture of the day: consumers and the economy 11 Oct 2008
- Consumers ‘do believe in the green shoot story’ 26 May 2009
- Chart of the day: consumer credit growth 29 May 2008
Using his number of the required $2 trillion of private deleveraging and $150 billion that has been accomplished thus far, America has twenty years of deleveraging remaining. That’s an entire generation of Americans.