[adebtlawyer]

> The US is one of the few developed nations that has been busy paying down household debt for the last five years.

In the US, the people with the highest debt-to-income ratios have been briskly filing for bankruptcy over the last five years. I wish I had time to dig up another graph to match yours, volume of personal bankruptcy filings over the same period. It's correlated. It's also a much stronger effect than paying down, often someone with over 100% debt-to-income goes to 0% over a matter of months, with no change in income at all.

[eli_gottlieb]

Yeah, but the point is, once the debt is cleared, by being paid or by bankruptcy, the private sector steadily regains its ability to plan rationally and pass information around in price signals. That's why fairly "easy" bankruptcy laws are usually considered more pro-business, while "moralizing" bankruptcy laws, as more often found in Europe, are actually considered to depress the economy (by simultaneously mobilizing vast machinery to pay out on "bad bets" and heavily penalizing business failure, thus increasing the risk-up-front of entrepreneurship and investment).

[adventured]

That's only partially accurate. The explosion of personal bankruptcies due to the great recession was mostly cleared by early to mid 2011. Since then, the household debt to income ratio has continued to fall. And meanwhile, wages are climbing, unemployment has dropped substantially (including on the U6), and full-time jobs have roared back in the last 3.5 years. The median household credit score has also been climbing for several years since the bankruptcy flood years.