The Great American Debt Boom, 1949-2013

The Great American Debt Boom, 1949-2013 (PDF, 36 pages) by Moritz Kuhn, Moritz Schularick, & Ulrike I. Steins.

Just from the title, you already know that the "Debt Boom" paper is about the growth of debt in America. And we didn't even get to the first sentence yet.

Here is that sentence:

The American economy experienced a dramatic increase in household debt since World War II.

Now you know that the paper is about the growth of only one part of debt in America: Household debt.

Household debt in red, All Sectors debt in blue, both as Percent of GDP:

Graph #1

Household debt is a small part of All Sectors debt.


Household debt as a percent of All Sectors debt:

Graph #2

Since 1966, Household debt has been a generally decreasing part of All Sectors debt.

Granted, it was an increasing share between 1999 and 2006, the years before the crisis. But the high point for Household debt, just before the crisis, was 28.1% of All Sectors debt. Compare that to 29.7% in 1980, and 30.5% in 1966.

In 2013, the last year studied in the Debt Boom PDF, Household debt reached a low of 23.1% of All Sectors debt. By 2017, the year the study was published, Household debt had fallen to 22.1% of all debt.

Household debt is a relatively small and generally decreasing share of All Sectors debt.


In their abstract, Kuhn, Schularick, and Steins write:

A quantitative assessment of household balance sheets demonstrates that financial vulnerabilities of different strata of the income distribution have risen substantially.

You know what? I don't doubt it. I am confident they are correct in saying that financial vulnerabilities have risen substantially across income groups.

But I am not at all confident that "a dramatic increase in household debt since World War II" is responsible for the rise in the financial vulnerability of households. I think responsibility lies with the dramatic increase in All Sectors debt, debt which the PDF fails to consider.