"This excludes, of course, government debt, which has been rising at an astronomical rate as well, but the impact of that rise can be delayed, because (at least so far) we can borrow instead of tax."


Can we have another ticker on this? There lies the rub!

If someone can de-linearize it and present it parabolicly, the adjusted for inflation question will be answered. Any gurus out there?

Great work, KD.

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If someone can de-linearize it and present it parabolicly, the adjusted for inflation question will be answered. Any gurus out there?

There is no adjustment necessary for inflation.

Both per-capita income and per-capita debt on that chart are shown in current (not constant) dollars; ergo, the impact of inflation cancels exactly.

It's not a problem for me, but to address the axis criticism you could convert the raw data into "% increase." That would allow a common axis.

But, as I said, doesn't bother me.

Income versus credit per capita really begins to diverge in 1994. I wonder what happened in 1994 that might have started that. What happened in 1994? Oh, wait! NAFTA came into force in 1994, and was the start of a large spate of United States free trade agreements that outsourced manufacturing jobs to low cost jurisdictions.

All of the raw data IS charted in "percent increase" in the second chart.

I did that to address that criticism.

OK, gotcha. My error.

Or you might consider dividing the monthly per capita CC debt by the monthly per capita income...

The second chart is far superior. That first chart really bugged me ... in engineering they really drove it home to start our charts at zero if possible and always label each axis ... hehheh

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To fix our economy consumer incomes must be brought back in line with per-capita debt - period.

Karl, we all know this is NOT going to happen, hence we have the mother of all asset inflation campaigns by the Fed to fill the income gab with asset price inflation.

I wonder though if they may succeed in this:
1. No member crony banks or large government entities can ever fail, and all the larger banks especially know this. They dump their toxic assets on the Fed's balance sheet and get their accounts credited. This is essentially risk-free investing for them, and in turn, they can keep lending to consumers through this arrangement with the central bank.
2. No one can look into the Fed's true balance sheet, so they can continue to hide the bezzle.
3. The Fed can use the same method to fund the government too: buy the Treasury debt from the government and create money out of thin air.
4. If the toxic assets go bust, the Feds writes it off since it can essentially credit its own account.
5. The fact that most (if not all) central banks are participating in this sham means that no one’s single currency will collapse since they are all trying to outdo each other in currency devaluation.

Foreign governments have given the green light for the Fed to inflate away.

Graphs like the ones presented here (IMO) give a micro look the scope and magnitude of America’s addiction to the credit drug but also convey the ignorance of foreign governments to fund this charade over a extended period of time

The question which bothers me is how much time were Ben and his merry men given?

Once the counter reaches zero……well…

Well I think I'll just take my Capital One card down to the local Piggly Wiggly and get me a 30 pack of Busch beer for my holiday weekend. I need to drink now.

Pondering this... some questions.

1) Per capita income.. is that like average wage? Is it income per person, or income per person who has an income? Is it averaged over the whole population incl children?

2)Same question re credit.

It’s just that if you are looking at borrower stress, the "per capita" measure dilutes the stress by spreading it over people with high incomes/no credit use.

Debt stats in Uk look MUCH worse when they are only averaged over people who actually have debt.

"Average household debt in the UK is ~ £9,226 (excluding mortgages). This figure increases to £21,457 if the average is based on the number of households who actually have some form of unsecured loan."-
(July 2009)
http://www.creditaction.org.uk/debt-stat....

In the UK I read countless stats saying the last 10 years has been great for only a small part of the pop (top earners), with most not enjoying anything like the average income increase. Secondly, the massive personal credit "expansion" was due to changes in regulation, changes in oversight and changes in the statistical processing of debt pools- this all resulted in the ability of banks to lend MORE to the credit worthy, and lend AT ALL to the less credit worthy.

So my question is... is this a good graph of borrower "stress"? Does it compare change in borrowers income, change in borrowers outgoings (incl tax)and the change in their access to credit?

Finally, again in the Uk, gov borrowing is relevant as tax money is redistributed to many people who use it to support their debts (teachers, doctors, income support, unemployed etc).

Reduction of interest rates has certainly helped, unemployment has hindered. Increase prices of staples have hindered as has reduction in asset prices.

I guess one thing the graph can never show, that is the pulling forward of future consumption will leave a hole in future demand, as well as the pulling forward of future credit (gov debt liabilities and spending commitments) will also leave a hole in future income.

I guess my whole question revolves around the fact that probably only 1/3 of our pop is over stressed, yet the graph reflects the whole pop.

This triggers my upset about the prudent having to bail out the imprudent.

On reflection, are we all to blame because we didn’t stop it? I certainly didn't care enough to lobby anyone 10 years ago. Perhaps the final lesson is for all of us; its irresponsible to borrow too much, its irresponsible to lend too much, its irresponsible to promise too much, its irresponsible to turn a blind eye to it all and its irresponsible not to know.

Guess we got the irresponsibility depression.

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Karl, we all know this is NOT going to happen, hence we have the mother of all asset inflation campaigns by the Fed to fill the income gab with asset price inflation.

I disagree...well...somewhat. The Fed, outside of MASSIVE monetization, cannot inflate. I think this has been proven over the last 10 months...their Keynesian attempts to reflate have failed miserably.

What I'm curious about...since the 2nd chart goes up to 2008, is what total consumer credit, per-cap income and per-cap credit will look like in 2009-10. Its probably safe to say that both income AND credit will be reduced; BUT will real consumer income (and I'm unsure whether unemployment benefits count toward this...I believe they do) will fall faster than consumer credit...I believe this is happening and is the reason why this recession is NOT like any other in recent time...the numbers don't lie...the consumer really HAS hit the wall. It cannot support any more debt. I can't BELIEVE the "economists" who have a bullhorn are not seeing this. We get a frickin 100 point rally today on the worse unemployment report in 26 years? Jobless recovery my a$$...people don't have income when they are unemployed...this just make matters much MUCH worse. I just can't understand the disconnect here...and the Fed...they're just adding to the problem...the fantasy accounting...adding to the problem, the market pump "experts"...adding to the problem.

This chart does a really good job displaying KD "main" thesis...bad debt MUST be cleared out of the system before there can be any recovery and sound functioning of our economy. The distance between Per-cap debt and per-cap income must close. Damn...the next leg down is going to be a painful one...because 1) I don't know where new jobs are going to come from, 2) I don't know where new production going to come from, and 3) Where is the damn money going to come from?

typo " per-capital" = per capita

"I have been challenged repeatedly on the chart of credit and population that I put forward; for those who want to review it, here it is:"

Challenged by whom? Folks that are in denial about all the corporate bankruptcies in just the last 24 months? Folks that are in denial about the insolvent banks being seized every week? Or perhaps folks that actually themselves are debt slaves and are ashamed or afraid to admit it?

Let's be blunt. Regardless of WHATEVER the overall CONSUMER debt is, it cannot be paid back. The CONTRACTION (medicine) would destroy what part of our economy that is still getting by. The ongoing orderly default of the debt is cleansing the system. Sure, it hurts many with loss of jobs, shelter, and possessions. But...folks only lose what they do not own or control. Personally, I think what is ongoing is the best thing to get this country back to being a great nation. Hard work. Ethics. Help thy neighbor. Blah blah blah, but it's true.

I found the continuation of the table for the Per-cap income for 2007, and updated the graph. The flattening of income is rather apparent.......

Gen,

Great ticker. This is one that even the most stubborn bulls (and relatives) should understand.

I have one question. Why choose to begin in 1970? I've noticed Elizabeth Warrens recent speech at Berkeley started at the same point. What happens when we look farther back to say 1950 or 1960? I'm sure the ramp up probably gets even worse.

Some other data sources here:

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http://www.bea.gov/newsreleases/national....

Personal income increased $3.8 billion, or less than 0.1 percent, and disposable personal income
(DPI) decreased $4.6 billion, or less than 0.1 percent, in July, according to the Bureau of Economic
Analysis. Personal consumption expenditures (PCE) increased $25.0 billion, or 0.2 percent. In June,
personal income decreased $133.4 billion, or 1.1 percent, DPI decreased $119.9 billion, or 1.1 percent,
and PCE increased $60.9 billion, or 0.6 percent, based on revised estimates.

Real disposable income decreased 0.1 percent in July, compared with a decrease of 1.6 percent
in June. Real PCE increased 0.2 percent, compared with an increase of 0.1 percent.

I used to believe that disposable income was the amount of money left over after you serviced your debt.

I wonder if my thoughts were wrong based on people turning prior available credit in to debt and calling it income?

Depression here we come.

Massive default and THEN depression here we come!

Yeah, I copied and read this in the hot tub. Can't think of any way out of this mess. I drove 4000 miles for two weeks in July and killed time trying to come up with a solution. Came up empty. We haven't even begun the collective pain faze, but it's coming. Reaping the whirlwind. Sorry bout that bulls.

BEA puts all sorts of **** in their numbers.

Census counts "money income" as just that - all money received from all sources for all persons 15 and older.

No bull**** games like BEA.