Calculatin' debt service

Yesterday I thought of a way to calculate the debt service ratio with my only guess being the percentage of our debt that we pay off each year, on average. Granted, it's a guess. But I don't have to guess all the numbers; just the one.

I came up with this graph:

Graph #1: Household Debt Service since 1980 (blue) and my calculation (red)

While going thru the motions, making the graph and writing the thing up, I remembered doing something similar before. In Reverse Engineering the Household Debt Service Ratio (14 August 2016), using the change in household debt along with net private saving, both of them smoothed, weighted, and "relative to DPI", I generated a graph that to my mind was pretty darn good match to the Household Debt Service ratio.

Using that same data from 2016, this graph shows the debt service ratio (which goes back only to 1980) and my calculation (which goes back to 1952). As in the 2016 post, my calculated data is shown with a two-year lag:

Graph #2

The graph shows household debt service beginning in 1980, and my calculation beginning in the 1950s.


As a glance at the two graphs will tell you, the calculations are far apart in the early years. I put both calcs together on a graph, along with FRED's debt service data:

Graph #3: Combining the Data

Egads! It's worse than I thought.

Funny how red and green can run so close to blue for most of the years after 1980, but so far from each other in the years before.

Oh, well. At least I got a blog post out of it.