The United States is cutting its debt. Well, the private sector is, anyway.
That's one key takeaway from an interesting report released today by The McKinsey Global Institute on how economies around the world are handling their debt problems that resulted from the 2008 global credit bubble and subsequent financial crisis.
The US now leads the world's 10 largest countries in cutting its total debt, the report states. South Korea and Australia are the only two other countries where the ratio of total debt (private and public sector) has fallen relative to GDP.
It's an important stat, as McKinsey points out, because lower private debt often clears the way for economic growth, which in turn allows for public debt levels to eventually come down, too.
Here are the report's money quotes on how things are shaking out in debt-ridden America:
Debt in the financial sector has fallen back to levels last seen in 2000, before the credit bubble, and the ratio of corporate debt relative to GDP has also fallen. US households have made more progress in debt reduction than other countries, and may have roughly two more years before returning to sustainable levels of debt.
Two risks remain that could derail the deleveraging trend, McKinsey warns:
1) The weak housing market
2) Washington's questionable ability to come up with a medium-term plan to lower America's public debt
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