Household debt as a percentage of GDP ballooned until 2009

Amidst all the discussion of the ratio of national debt to GDP, there has been little discussion of the ratio of Americans’ household debt as a percentage of GDP.

Using a graph generated at, here’s the total household debt as a percentage of GDP. The red lines and the guides on the right axis indicate the percentage change year over year. As you can see, with the exception of the period from the late 60s to the mid 80s, household debt has been increasing for most of the last 60 years. Only in this recession has household debt plummeted — but only after a steep increase as the housing bubble was inflating. The 99% peak was in the first quarter of 2009. Since then we’ve tumbled to 89% and will probably fall further.Some portion of the decline is related to more conservative consumer behavior, but most of the decline in household sector debt is related to foreclosures. Debt has simply been eliminated in many cases.

We will probably be better off in the long run if the red line stays in negative territory for an extended period of time — that would mean that Americans are paying down their individual debt as a percent of the total economy. Of course, that reduced spending will also be a drag on the economy.

We’ve been living on borrowed money for a long time. And I guess it’s no surprise that public sector debt would balloon over the years. After all, Americans were running their households on the same principles that they were running the government.