The deleveraging of America is over, or mostly over — and that's good news and possibly bad. All that "leverage" (loans, debts, mortgages) impeded recovery. Borrowers were overborrowed. Lenders were overlent. Credit standards were too lax. It would take time, we were told, for these excesses to shrink. Borrowers would pay down debts. Lenders would write off bad loans. But now that this ugly process seems mostly done, more money can flow into old-fashioned consumer and business spending. The recovery should strengthen.
That's the good news, and the bad could be: If this improvement doesn't occur, it suggests that the economy suffers from deeper and harder-to-cure ills.
For now, the evidence on deleveraging is overwhelming. All the economy's major sectors, with the conspicuous exception of government, have lightened their financial burdens. This includes households, banks and major corporations. They've reduced their debts or refinanced at lower interest rates so that servicing their loans is less costly.