This graph show that household balance sheets have been on steady rise since the trough of the recession. Liquid assets to liabilities are at the highest level since 2001, and they are at their longer term average between 1980 and 2008. The graph also shows the influence of the two asset bubbles that we have had. The ratio rose rapidly during the boom in stock prices in the 1990's. It fell dramatically from the peak in the 1990's and it was well below the longer term average during the early 2000's. That reflects the boom in housing that was fueled by household debt. It dropped further in the recession and it has been slowly moving up towards the average as households curbed spending and repaired their balance sheets. That process is continuing. Consumption is expected to grow at around 1% on an annual basis for 2012. Since median incomes are not rising, it is not likely that the ratio will move above its average in the near term.
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