Michael Perelman wrote:
how much of an interest rate hit, can the economy take without reeling.
I looked at the Flow of Funds.
From 2001Q1 to 2004Q1, total outstanding debt in the U.S. grew at 1.8%
quarterly. I suppose debt tends to grow faster than the GDP, but isn't this too brisk a pace considering how slow the economy has been?
Compare to rates of broken-down sectors for same period (in parenthesis the % of total outstanding debt held by sector):
Federal gov't (18.2) 1.9% State & local gov'ts (7) 2.3% Businesses (32.9) 0.9% Households (41.8) 2.4%
Clearly, businesses have been purging their financials since the boom ended. State & local gov'ts as well as households have become more vulnerable to shocks, which can reverberate on the financial sector (domestic and foreign) that has the asset side of these liabilities.
Julio
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