Yes we can pay down our household debt

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Here’s today’s moment in economic history making: U.S. households are paying down their debt. It’s a brave new world for the Land of Conspicuous Consumption.

The Federal Reserve announced that for the first time since at least 1952, the amount of debt held by households—a.k.a., regular folk—is on the decline. The third quarter saw a 0.8% annual drop in overall household debt, which is made up of two sub-categories: mortgage and consumer credit debt. It was the second period in a row that mortgage debt dropped. In the second quarter, mortgage debt was down 0.1%, and in the third quarter that became a 2.4% drop.

But what helped knocked total household debt into negative territory this time around was the rapid deceleration of consumer debt, including credit cards and car loans. Consumer credit debt grew at 4.7% in the first quarter, and 3.9% in the second. In the third quarter it grew at just 1.2%. That feels dangerously close to not growing at all. At first I figured we wouldn’t hit zero in the quarter that includes Christmas, but then I looked at the Fed’s quarterly breakdown going back to 2002. There actually isn’t normally a fourth-quarter spike. Could Americans really be on the cusp of fiscal responsibility?!

Barbara!