>The biggest reason I can think of off the top of my head is that
>far more people today have debt *because they can* as compared to
>1929. Longer mortgages, smaller down-payment requirements, and
>not-insignificant legal work against instutionalized racism in the
>banking means that a big component of "more debt" is really just
>an artifact of 1929's _debt restrictions_.
>
>So there's "more debt" ... so what?
>
>Another item: people sometimes look to "margin debt" as some kind
>of significant indicator, but the use of this has changed radically.
>Tax policy encourages people to restructure their finances to use
>margin debt instead of, for instance, auto loans.
>
>You have $40k and you want to buy a $20k car. Should you:
>
> a) Take out a $16k car loan and pay non-deductible interest
> b) Buy $40k of MSFT and write a margin check for $20k for the car,
> using your (attractively low!) interest payments to lower your
> cost basis of your stock purchase which, by the way, has
> appreciated over the 4 years of $300/month payments you make
> on the car.
>
>The same obviosuly goes for "home equity loans" ... in the parts
>of the country which have skyrocketing real estate prices, this is
>another tax avoidence scheme that "increases debt" in ways you
>simply couldn't do before but without actually adding to "real"
>debt.
>
>Other than stuff like that, go right ahead and compare away :-)
That's all very nice, but what matters is ability to pay. If people borrowed against stock to buy a car, the debt remains even if the stock price is cut in half. Sure, there were few forms of consumer credit available 70 years ago - which means there's a lot more debt to contend with should things sour.
Debt is looking a bit more manageable now than a year or two ago - personal bankruptcies are down about 10% over the last year, and delinquencies are down too. But household debt levels are much higher than they were in the late 1980s, and we know how those impeded recovery from the 1989-92 period of stagnation.
Doug