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The following note from Northern Trust helps put the balance sheet recession into perspective.   A recovery that is driven by the private sector and largely self sustaining is unlikely to occur before we see continued de-leveraging:

“The reduction in total private sector debt (businesses and households) is also significant and compares closely with the situation after the 1990-91 recession (see Chart 3).  Private sector debt as a percent of GDP peaked in the first quarter of 2009 (177.8%), with the second quarter reading at 167.9%.  A similar reduction in the 1990s was spread over nearly four years.  This sharp decline in consumer and business sector spending has resulted in the elevated jobless rate.  These numbers are being tracked closely for an early confirmation of improving conditions.  It is not a mere coincidence that economic growth gathered steam only after private sector credit growth was visible following the 1990-91 recession.”

Source: Northern Trust

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