Deleveraging fail...

The numbers say average credit card debt for households fell about $3,500 from their peak in 2008 - so good news, right? The story goes that consumers tightened their belts, issuers tightened their purse strings, and debt was paid down. But a closer look at household credit card debt statistics suggests otherwise.

Credit card debt rose steadily up until 2008, then fell sharply in '09 and '10. We know this. Nowadays, the average American household owes around $6,800. But this hides the fact that debt is disproportionately borne by a few households who are deeply underwater. Take the 2010 debt statistics (the last date at which we can get accurate estimates): the average household owed about $7,200, the median owed $3,300, and the average indebted household owed $16,400. The median is about 1/2 the average, which is itself less than 1/2 the average for indebted households. Those numbers point to a small number of very indebted households.

This strikes me as another case where the numbers hide the whole story. Economic policy that assumes we're all a little in debt is very, very different from one that assumes that a few of us are really in debt. In terms of social justice, we'd be better off concentrating our efforts on the few than targeting the median household.

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