Word: ratio
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That figure is now starting to fall. At the end of 2008, the debt-to-income ratio was down to 130%, and new numbers from the Federal Reserve on Thursday are sure to show another drop...
Chances are, there is much more unraveling - deleveraging, to be technical about it - to come. Gluskin Sheff's Rosenberg looked at the ratio of household debt to total net worth and figured that for things to fall back in line with where they've been historically, Americans would have to get rid of some $3 trillion to $5 trillion in debt over the next few years. (Read "Lidia Bastianich Saves Our Dough.") Lansing and San Francisco Fed colleague Reuven Glick ran a simulation of what would happen if U.S. consumers followed a path similar to that of Japanese businesses...
...understand the Great Consumer Retrenchment is to look at the amount of debt the typical household carries as a percentage of its disposable income. The ratio of debt to income increased from about 35% in the early 1950s to about 65% by the mid-1960s, where it more or less stayed until the late 1980s. That's when debt started its epic rise, hitting 100% of income in 2001 and going all the way up to 133% in 2007. (Read "Five Reasons for Economic Optimism...
What's the proper way to drink whiskey? One, you have to have some measure of water, whether it's just a capful or a one-to-one ratio. It lessens the alcohol and brings out the flavors. Every whiskey professional that I've been in contact with added some measure of water. People who just drink it straight are showing off that they can drink alcohol straight. And remember: getting drunk dulls the senses, so if you want to taste whiskey, getting drunk is not the way to do it. It's certainly a nice side effect, though...
...none of that changes the long-term reality of how indebted Americans are a structural issue that will require more than a couple of months to return to historic normalcy. A recent research note by economists at the Federal Reserve Bank of San Francisco points out that the ratio of household debt to personal disposable income a measure of how "leveraged" individuals are has barely budged from its 2007 high of 133%. In 1960, that ratio was 55% in 1960 and in the mid-1980s...