The SMH is reporting some promising comments from a former director of the US Congressional Budget Office says the US economy that the US has:
…largely completed its process of private-sector deleveraging that began as a consequence of the financial crisis. The other bit of good news is that the rate of fiscal consolidation at the state and local government level in the US was also near the end of its cycle. “Those two factors were the primary constraints on US economic activity up until this calendar year, but they’re mostly done,” said Mr Orszag, who also served as director of the Office of Management and Budget in the Obama administration. Mr Orszag arrived in Australia this morning from the US, and has just visited Citigroup’s Sydney office on George Street. He will appear at a conference with Reserve Bank governor Glenn Stevens tomorrow in Sydney. Mr Orzsag said the main thing impeding US economic growth now was the level of fiscal consolidation at the federal level.
Which will, most likely, go on. If we check the data there are signals to suggest the US private sector deleveraging is slowly passing but also that it’s not over nor does it appear to about to re-leverage. Households are the key. From the NYFed:
That doesn’t look over and done to me. Not at the state level either:
But, like here, loans are being paid down faster so new loan creation is to some extent hidden and is trending upwards:
At the account level, however, the activity now looks more like a compositional change that additions to the debt stock:
The real problem of declaring the US develeraging over, however, is that the economy currently has no cost of capital, so how can you possibly tell?
