Total All Debt trends - what's happening here?

Edwards Finance > Debt Management

Q. What I am asking you about is the specific category term used by the Federal Reserve - "Domestic Financial Sector Debt" - which is separate from their other main categories such as "Household debt", "Business Debt", government, etc. I understand the components of household, business, etc. and can add all their categories to arrive at $21.5 trillion total debt excluding the $1.5 trillion of fed govt trust fund debt the Fed reserve does not count because the fed. govt only issued IOUs for that. But, I am asking only about the 'domestic financial sector', its meaning AND especially what are the sub-components of what they call "domestic financial sector debt' - - and where can I find historic data for said components? Perhaps this clarification of the sector I am after helps you on my first question above. I have looked through their various databases, but must have missed the one that answers my question. Any debt component that rises that much faster than the economy, now at an accelerating rate, is worthy of trying to gain some understanding. I am refraining from making any rush to judgment - - want the data first. Hope you can answer it.

A. -There is nothing surprising or alarming about the "total debt" in the U.S. economy. As an economy grows, so does savings. The economy is larger today than ever, therefore the total level of savings is larger than ever. Debt is nothing more than the process of shifting funds from savers to borrowers. This is a necessary property of capitalism. Firms may need to borrow to cover temporary cash flow problems or to finance a long-term investment. Simply looking at the total debt number (in levels or percentages) paints a misleading picture. That debt is also an asset, and it is used to finance some sort of productive activity. The level of debt relative to the value of the asset it was used to acquire is the more important perspective. -Yes but this was after running up unusual debt to support a four year world war! -I don't think the level of the stock market proves our debt level is sustainable. We'll only be able to tell that in hindsight. For example, in 1989, practically every economist and financial analyst was talking about the Nikkei and how it was supposed to go up forever. Until December 31, 1989, the level of the stock market "proved" them right. However, deflation was in the cards but it was only those looking at fundamentals that saw the possibility of the Nikkei going down.

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