Issue Household deleveraging does not remove the risk if debt moves to other sectors

Summary

MGI adds a caveat to the story of falling household debt in the United States, Europe, and elsewhere. Lower borrowing does make household balance sheets healthier on their own terms. But if debt keeps rising in other sectors, such as corporations in China or governments in many advanced economies, an eventual correction there can still reach households. The channel is indirect, running through the financial assets households own and the pension funds they belong to that hold those assets. The report therefore argues that assessing household wealth requires looking at the full, interconnected balance sheet rather than household debt alone.