There was an eyebrow-raising piece in the WSJ on Friday, U.S. Families Slice Debt to Lowest in Six Years.
The opening sentence contains a rather laughable leap:
U.S. families—by defaulting on their loans and scrimping on expenses—shouldered a smaller debt burden in 2010 than at any point in the previous six years, putting them in position to start spending more.
How marvelous. Through the hard work of throwing around nickels like manhole covers — plus a whole lot of defaulting — consumers have succeeded in dialing the clock all the way back to, wait for it, the salad days of the MEW-fueled consumption frenzy, just before the personal savings rate went negative.
(MEW, lest we forget the acronyms of the boom, stands for “mortgage equity withdrawal.”)
Via the Fed, average household debt-to-income levels peaked around 130%. Now down to 116%, the suggestion that families are “in position to start spending more” is akin to a morbidly obese man — who has just come off a heart attack — feeling he can celebrate the loss of a few pounds by eating whole cheesecakes again.