In today’s WSJ, columnist Greg Ip (“Capital Account” – Hedge Fund Titan Puts Away the Punch Bowl), writes about a number of concerns expressed by Ray Dalio, the well-know hedge fund manager, the biggest one being that “Americans have accumulated far more debt than they have assets and income to support.”
The Great Recession has been described as a balance sheet recession, and we understand that households have been digging themselves out of their deep holes since the financial crisis.
I’d like to what Cullen and everybody else who chimes in on this site thinks about the health of our balance sheets. I know wage growth has been mostly absent, but I thought that from a macro standpoint, that our balance sheets were in much better shape now. Debt service (interest plus amortization) as a percentage of GDP is pretty high – so I get that part of Dalio’s point. On the other hand, I’ve seen several charts on the trends of private sector credit expansion – and many of them are flat, which suggests (to me) that we’re still in a muddle through situation – and I don’t see the Fed tightening a whole lot more in the next year or two.
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