Household Debt Threatens Economic Recovery


It is not a surprise that a major threat to the US economy is the country’s rapidly growing debt. However, it’s not just the national debt that is a problem. Private debt owed by individual households is also spiraling. Household debt has become such a prominent problem, it deserves as much, if not more, media attention than government debt. The pressures of household debt have caused some economists to suggest that the US economy is emulating that of Japan of the 1990s. Japan suffered a similar “real estate bust,” affecting the economy for years, and the nineties became known as the “Lost Decade” in Japan. The US seems to be following a similar path.

Many optimistic American believe we will be out of this “economic funk” soon, but Carmen Reinhart, a Senior Fellow at the Peterson Institute for International Economics (and a leading expert on financial crisis), writes, “I think we’re in for a lot of disappointment’ we’re already four years into this. I don’t think the next six years look great.”

To climb out of the economic doldrums, Americans must increase consumer spending. Unfortunately, Stephen Roach of Morgan Stanley calls Americans “zombie consumers” because we are “burdened with underwater mortgages, excessive debt, and subpar saving. U.S. consumers are stretched as never before.” While consumer spending is a key ingredient for an economic turnaround, Americans are simply too bogged down with household debt. This debt remains a looming problem ? while recently Americans have been saving more, debt is so outrageously high that it will take years before Americans will be able to afford the much needed increase in consumer spending.

Page Perry has over 125 years of collective experience representing institutional and individual investors in securities-related litigation and arbitration all over the country. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions.