Peter Cecchini, chief strategist at BGC Financial, talks to Pimm Fox about the U.S. economy and consumer credit on Bloomberg Television’s "Taking Stock." He says that the 122% percent household debt to GDP ratio is well above the pre-1980 average of 60-80%. Just to get back to a 100% to GDP ratio, we need an additional $2 trillion of deleveraging. In the absence of income growth, you just aren’t going to get these numbers down without deleveraging.
This is the major reason I have said that household deleveraging has just begun and that we will be in a balance sheet recession for the foreseeable future. Cecchini says the fake recovery has really been just a liquidity trade, one that has run out of steam. Could we be on the cusp of another more powerful liquidity trade? I think so. But more on that later in the week.