Yeah, Bill, but

Bill Mitchell writes:

Unsustainable growth processes are those that rely on households accumulating ever increasing debt levels.

That's true. But don't get your undies in a bunch. The last time we relied on households accumulating ever-increasing debt levels it worked for 60 years, from 1947 to 2007.

After 2007 the US economy went into ever-decreasing debt levels mode, which lasted about four years. Then it took another four years or so with household debt on the increase, before it finally went above the pre-crisis peak. Then we started to hear the knee-jerk warnings about debt causing another crisis.

I'm empathetic. I agree that debt is the problem. But it is not necessarily a problem if debt today is more than it was yesterday. That happens all the time. There is too much baseless fear in our gut these days, left over from the problems of 2007-2009.

It is true that household debt is now (and has been since 2016) higher than it was at the previous peak:

Graph #1

But that is not true for debt relative to income:

Graph #2

Not even close. Actually it looks like it's still going down. (When it starts going up, that's when we get the vigor I've been predicting since 2016.)

Likewise, debt service costs remain low:

Graph #3

It's too soon to panic over debt. First comes the vigor.

Stop and smell the roses.