Can US consumers spend us out of this recession?

The US consumer drives the world economy. In the past two recessions, spending by the US households got the economy growing. Can they do it again?

First, consider the early 1990s recession. See the graph below. The blue line is the savings rate. It is about 8%. This means that household saved about 8% of their income. The bars on the bottom are the net new morgage debt each quarter. It shows pretty stable borrowing for an expanding population. The red rectangle show the recession. How are consumers going to get us out of the recession?

You can see from the graph below what happened. In the 1990s, the savings rate fell to zero. US households spent more money by saving less. Also note that the new net mortgage debt remained very stable until the last years of the 1990s. Times got a bit excessive then (day trading, dot com bomb stocks, etc.)

See the recession in 2001? How are the consumers going to be able to spend us out of that one? They already spend all of their income.

As you can see from the graph below, consumers spend more by borrowing a lot more! The net new mortgage debt skyrocketed in the last few years.

So now we are in another recession. But the US consumer has saved little in the past two decades. Some of those savings were in the stock market and real estate, and have thus done poorly recently. In addition, a lot of debt has been piled up. I am showing just mortgage debt here, but you could illustrate this with credit card debt too.

The US household is tapped out. We hear about banks and hedge funds deleveraging, but the household is too. Notice the right/bottom corner of the last graph. Households are actually reducing total mortgage debt for the first time in more than fifty years. It even looks like the savings rate has ticked up.

No, I don't think the US consumer can pull us out of this one. It may be a couple of years or more before the household "balance sheet" is rebuilt.