Household debt has topped the record from 2008, a fact that has some consumers wondering whether or not to run and hide from borrowing.
Harvard historian Nancy Koehn joined BPR to talk about the rising household debt, and told listeners not to panic — yet.
“I think we have a lot of signs that suggest that the economy at an aggregate level is humming along,” she said. “The country as a whole, with that level of indebtedness, is in a much better position than it was in 2008.”
Koehn went on to explain how the country recovered from the crisis in 2008, shoring up mortgages.
“Very steadily households pulled down their debt,” she said. “Some of that was because they stopped overspending what they made.”
Koehn said that since 2013, debt has been climbing steadily, but mortgages don’t hold as high a percentage of that debt as they once did.
Now, student loan debt and auto debt take a larger share, which proves the country might not be completely safe from consequences of that large debt.
“Auto loan delinquencies and credit card delinquencies are rising suddenly, so those things suggest vulnerability in American households’ ability to service that debt, to deal with that debt,” said Koehn. “We are talking a number ... that is about 70 percent of all the goods and services produced in America last year, so it’s a big number.”
Nancy Koehn holds the James E. Robeson Chair of Business Administration at the Harvard Business School. Her forthcoming book is "Forged in Crisis: The Power of Courageous Leadership in Turbulent Times." To hear her interview in its entirety, click on the audio player above.
