This is but one illustration of the challenge ahead (MoneyGame)

Into the Abyss: The Coming Cycle of Debt Deflation

 

6/19

 

Although it has been reported that American consumers are saving at a rate of 3.4%, the contraction of the broad money supply suggests savings liquidation.  Given a contracting money supply, ongoing debt defaults and declining consumer spending, the increase in non-mortgage consumer loans indicates that consumers are borrowing where possible to consolidate debts, cover debt service, or borrowing to continue operating financially as their total debt grows, thus as they approach insolvency.

Chart courtesy of the Federal Reserve Bank of St. Louis

Tags: Debt, Deflation, U.S. Government, Features

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