What happens to Debt?

The Chart (from Barrons) shows the changing nature of debt service in the country as a percentage of household income. There are two obvious questions, with the dump in wealth that the last quarter took from Americans, what is likely to happen on repayment?

Second, when you compound this with the debt service required of the federal government we seem to be in historic tendencies.

The charts suggest two possibilities. First, typical Keynesian solutions, if they ever worked, may be less effective in this kind of environment. Second, combining household and government debt as a percentage of GDP may suggest some longer term problems with inflation.

There is a third possibility also, consumers may have reached or exceeded their capacity for debt. If that is true that may say a lot about consumption patterns on housing and consumer goods going forward.