The Great Unwinding

By DAVID BROOKS
NYT

Here’s one way to look at the politics of our era: We’ve moved from The Age of Leverage to The Great Unwinding.

For about a generation, the U.S. surfed on a growing wave of debt. The ratio of debt-to-personal-disposable income was 55 percent in 1960. Since then, it has more than doubled, reaching 133 percent in 2007. Total credit market debt — throwing in corporate, financial and other borrowing — has risen apace, surging from 143 percent of G.D.P. in 1951 to 350 percent of G.D.P. last year.

Charts that mark these trends are truly horrifying. There is a steady level of debt through most of the 20th century, until the mid-1980s. Then there is a steep accelerating rise to today’s epic levels.

This rise in debt fueled a consumption binge. Consumption as a share of G.D.P. stood at around 62 percent in the mid-1960s, and rose to about 73 percent by 2008. The baby boomers enjoyed an incredible spending binge. Meanwhile the Chinese, Japanese and European economies became reliant on the overextended U.S. consumer. It couldn’t last.

(More here.)