Deleveraging is Not a Myth

The New Yorker's The Develeraging Myth states (at a high level) that consumers are not deleveraging because they are still spending:

Americans certainly have lots of debt, but the evidence that it’s killing the recovery is surprisingly sketchy. For a start, American consumers are not actually keeping their wallets closed. Real consumer spending, after collapsing in 2009, has risen for nine straight quarters; this past quarter it was up at an annualized rate of 2.4 per cent. That looks anemic by the standard of past recoveries, but, with an unemployment rate near ten per cent and wages barely rising, that’s to be expected.

EconomPic has explained how spending has remained strong in the face of lower income and higher savings here. More curious is why an article on consumer credit focuses on spending, rather than consumer credit.

Looking at the actual consumer credit data, we see that consumers (with the exception of student loans) have reduced consumer credit dramatically. Both revolving (mainly credit card loans) and non-revolving (excluding student loans) credit levels are back to 2004 levels. As a percent of GDP, the reduction has been even greater.