My bookmarks

Pins are saved using cookies. Deleting them from your browser will delete your preferences.

Menu

Doomed by Debt?

31 August 2018

Many investors are fearful of the amount of debt in the U.S. and the rest of the world. While it is true that debt levels are elevated, debt service, or the share of income used for interest payments and amortizations, is quite low relative to history. The two metrics tell very different stories about the economy.

Americans Are Not Overburdened by Debt

 

- U.S. debt of households and non-financial corporations climbed to a record of nearly $30 trillion at the end of last year. As a percent of GDP it was also quite high at 152%, up from 127% in the late 1990s but below the recent peak of 169% set right before the Global Financial Crisis in 2008.

- However, U.S. debt service ratios are low relative to historical levels. Just prior to the past two recessions, debt service ratios peaked at 18.4% and 17.3%, respectively. Those numbers are higher than the current 14.9%.

- The story is much the same in the rest of the world. Countries such as Germany, Japan and the U.K. have debt service ratios that are near decade lows.

- Low debt service ratios indicate that debt payments are not a burden to household and corporate borrowers. This implies debt levels are manageable and not an impediment to the economy.

Download Alger On the Money

La Française Group provides access to the expertise of a number of asset management companies around the world. To provide you with the most relevant information, we have developed an interface to present the full range of products available for your investor profile and country of residence.
Present yourself
1
Country
2
Language
3
Profile
Your country of residence
Your language
Your profile
<p class="new-disclaimer__legal-notice">Before consulting this website, for your protection and in your interest, please read the “<a href="en/legal-notice/" target="_blank">disclaimer</a>” and “<a href="en/regulatory-information/" target="_blank">current regulations</a>” carefully. This information explains certain legal and regulatory restrictions which apply to individual and professional investors according to local law. By accessing this site, in my non-professional or professional capacity, I acknowledge that I have read and accept the terms and conditions of use. Pursuant to the application of the European Markets in Financial Instruments Directive (“MiFID”), please state to which category of investor you belong&nbsp;:</p>
<p class="new-disclaimer__legal-notice">Before consulting this website, for your protection and in your interest, please read the “<a href="en/legal-notice/" target="_blank">disclaimer</a>” and “<a href="en/regulatory-information/" target="_blank">current regulations</a>” carefully. This information explains certain legal and regulatory restrictions which apply to individual and professional investors according to local law. By accessing this site, in my non-professional or professional capacity, I acknowledge that I have read and accept the terms and conditions of use. Pursuant to the application of the European Markets in Financial Instruments Directive (“MiFID”), please state to which category of investor you belong&nbsp;:</p>
By continuing browsing on this website, you accept the use of cookies and other tracing devices s as to allow you to receive information suited to your profile, facilitate information sharing on social networks, guarantee the best browsing experience possible and to create statistics. To find out more, we invite you to consult our Privacy and Cookies policy. Find out more.