But the worsening balance sheet of U.S. consumers in 1990-91 (debt ratios, debt servicing ratios, employment contraction, wealth effects of housing and stock markets) was much less severe than the current downturn.
In my view, personal consumption will continue to contract quite sharply throughout 2009 as a result of negative wealth effects from housing and equity market losses, the disappearance of home equity withdrawal from the second half of 2008, mounting job losses, tighter credit conditions and high debt servicing ratios (the debt to income ratio went from 70% in the 90s, to 100% in 2000, to 140% now).
The recent sharp fall in gasoline and energy prices will increase real incomes by a modest amount (about $150 billion), but the losses of real disposable income and thus falling consumption from other sources (wealth, income, debt servicing ratios) are much larger and more significant.
In the Caribbean, like many regions around the world, we are saddled with extraordinarily high unemployment, cost of living, fiscal deficits and debt servicing ratios.
When this is taken into account, the debt-servicing ratio is close to its previous peak when the base rate stood at 15%.The borrowing binge of the past few years explains why people are having to shell out so much even though interest rates are still far lower than in the early 1990s.
In contrast to the old figures, this now shows that the debt-service ratio is higher than at its previous peak in the 1980s.When interest rates inevitably rise to normal levels, debt-service ratios will rise higher still.
Moreover, the household debt service ratio, which measures debt payments as a percentage of disposable personal income, keeps falling.
Argentina's debt-service ratio (the relation between debt payments and exports, a figure closely watched by markets) is over 60%.
In the fourth quarter of 2012 the average "debt-service ratio" for American households fell to its lowest level since records began in 1980.
Although Mexico was the biggest developing-country debtor at the end of 1995, its debt-service ratio (interest and principal payments as a share of exports of goods and services) was under 25%.
But strip out the budget "revenues" that accrue from issuing bonds, and the debt-service ratio looks scary: over 40% of the budget last year, and not much less this.In this section Lazarus of the East?
