While I'm not going to defend the use of revolving debt in Elizabeth Warren's presentation, Megan is underplaying the steady creep we've seen in household debt over the past decades. The following graph charts debt as a percentage of personal income, as a share of all assets, and mortgage debt as a share of real estate assets (source data here). The trends are pretty clear, and I'd argue, rather worrying:
So this stuff is increasing. The "all debt as a share of income" number is particularly worrying, as it's increased as much in the 2000-2005 period as in the 1979-2000 period. Megan might say it's all a function of asset bubbles, but economists I've talked to say the upper-bound estimate for the impact of asset market bubbles is half of the decline in the savings rate. Significant, but not, on its own, the whole story. So something is going on here. And I'm not the only one who thinks so. Michael Mandel, the chief economist at Business Week, calls the following graphic "the world's scariest chart," and while I don't think it quite compares to this one, it's not far off:
According to Mandel, the difference between the debt load we've seen and the debt load we might expect is $3 trillion dollars -- that's a lot of financial obligation weighing down our households, and we've only begun to see the effects. Im not one who believes our middle class is finished, but I wouldn't downplay the problems we're likely to face as these debts begin to come due.
So this stuff is increasing. The "all debt as a share of income" number is particularly worrying, as it's increased as much in the 2000-2005 period as in the 1979-2000 period. Megan might say it's all a function of asset bubbles, but economists I've talked to say the upper-bound estimate for the impact of asset market bubbles is half of the decline in the savings rate. Significant, but not, on its own, the whole story. So something is going on here. And I'm not the only one who thinks so. Michael Mandel, the chief economist at Business Week, calls the following graphic "the world's scariest chart," and while I don't think it quite compares to this one, it's not far off:According to Mandel, the difference between the debt load we've seen and the debt load we might expect is $3 trillion dollars -- that's a lot of financial obligation weighing down our households, and we've only begun to see the effects. Im not one who believes our middle class is finished, but I wouldn't downplay the problems we're likely to face as these debts begin to come due. 
