Historically, consumer deleveraging cycles see debt relative to income decrease by 30 to 35 percent.
And the answer is by radically reducing the cost of living relative to income.
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Were benefits going to rise under personal accounts, or fall relative to income under price indexing?
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At the other extreme, German house prices have fallen by 35% relative to income since 1980.
By roughly mid-2011, the level of consumer debt relative to income had declined by about 15 to 18 percent.
This, in turn, could, in theory, justify higher house prices relative to income.
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Relative to income, they have risen by 5% since 2000, compared with jumps of more than 25% in some other OECD countries.
Beata Caranci, Deputy Chief Economist at TD Bank, has noted that the ratio of consumer debt relative to income has also been cyclical.
Figure 1 below shows how extracted equity relative to income increased sharply along with house prices in the US during the housing boom.
In contrast to slower-growing San Francisco, New York and Los Angeles, most of the fastest-growing cities have lower housing prices relative to income.
Rural areas were found to be worst hit by the high rentals relative to income, with rents in Manchester and Birmingham more affordable than in north Devon or Herefordshire.
The argument though deflates considerably when one considers that the post 1980 reductions in higher education spending (relative to income) were actually considerably greater in the states with the highest income growth.
In the past, the magnitude of this wealth effect has been fairly modest, but it may have grown in many countries over the past decade or so as financial wealth has increased relative to income.
In 2007, household debt relative to income peaked at the highest level since 1928. (Uh oh.) When the housing market crashed, consumers were stranded with unsustainable debts, and until those debts are reduced, consumers will drastically cut back their spending.
But, interestingly, Stephen Hester has conceded - I think for the first time - that it will take longer than the promised five years for RBS to hit new targets for what he calls "value drivers", which are the profit that the bank earns relative to its equity capital, and its costs relative to income.
It treats people with more benefits relative to other income very differently from those with the opposite.
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The study, which focuses largely on English-speaking countries, looks at the price of housing relative to household income.
Relative to household income, the cost of owning and operating a car is now 30% lower than it was in the early 1960s.
Despite a credit boom, which has seen a big increase in low earners' unsecured debt relative to their income, the doorstep lending market is flat.
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The real estate site found that relative to median income, which has remained painfully flat in recent years, home prices in the 30 largest cities are still higher than their pre-bubble historic norms.
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Real house prices are 82% higher than they were in the last quarter of 1999, and have risen by 70% relative to household income, the biggest increase in all the countries Goldman has surveyed.
South Korea is the big exception: households have as much debt relative to their income as Americans and their saving rate has fallen over the past decade from 18% of disposable income to only 4%.
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Overall debt levels in many Asian economies are lower than in the West, but debt burdens relative to individual income are up to 30% higher compared with the U.S. in countries such as Malaysia, China, South Korea, Thailand, Indonesia and India, HSBC research shows.
At face value, the similarities between China and the United States, with respect to relative levels of assets to income, as well as demographics, are remarkable.
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This becomes especially misleading when comparing the top income group to any lower income group, or to changes in their relative income shares over time, when those income shares are measured by average incomes rather than median incomes.
Other studies confirm that people are often more concerned about their income relative to others' than about their absolute income.
But even if you accept Mr. Geithner's case that the well-to-do must pay more for their presumed "privilege" of being governed, his story ignores the empirical fact that they already do pay a record share of income taxes, even relative to their share of income.
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Net consumer borrowing relative to personal disposable income has fallen 4% in the year through March, the second-largest drop in 55 years.
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