Is Risky Business Back?

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July 26 (Bloomberg) -- On today's "Chart Attack," Pimco's Richard Clarida and Bloomberg's Adam Johnson look at debt on Bloomberg Television's "Street Smart." (Source: Bloomberg)

You can say that again.

Time for chart attack where we bring you a chart that will make you smarter.

Hopefully it will also make you a little bit of money.

So risky business might be back.

I'll tell you what, richard clara of pimco, you seem to think so.

You've got a chart that paints it out.

Let's give people a baseline, start with g.d.p. and talk people through that and then risk.

Ok, so over the last 50 or 60 years the u.s. economy's been growing.

G.d.p. measures that and that's the income that shows up in people's pockets.

That's your baseline income in the economy.

Let's bring in the camera and show people what we're talking about.

This is just g.d.p. going back to 1954. now you've got a wrink toll add on top of that.

-- wrinkle to add on top of that.

People often borrow against their income to buy a car or to buy a house.

The interesting fact about that is that for about 25 years, until 1984, people weren't levering up route to g.d.p. they were borrowing but in line with their income.

What we're looking at now is private nonfinancial, nonbank debt in effect.

And that yellow line, we really have levered ourselves vs.

G.d.p. it's when we call about the great moderation, there's also the great leveraging.

From 1982 to 2007. what's curious as i look at this, that's the deleveraging, but we haven't really delevered a whole lot.

The private sector has delevered a bit reltive to income and of course during the great recession we have a huge buildup of government debt.

The government's levering up and the real question going forward, will the private sector lesker up, stay on the sidelines or try to delever some more?

A big question for the forecast.

And your thought on that question?

That, yes, we're coming back together?

Year to date we've actually seen households reduce their saving in part to pay for the tax increases and so something i'm monitoring is so to see evidence if households rebuild that savings or if they're happy saving 2% of their income.

From k.k.r.'s profit to einhorn's most profitable

This text has been automatically generated. It may not be 100% accurate.


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