In a very insightful article written by Leandro Roque for Mises.org, the author explains why the Brazilian household debt (“endividamento das famílias“) as a percentage of disposable income is an increasingly worrying factor for the Brazilian economy.
In November 2011, for instance, this debt reached 43%, meaning that a family owes, on average, the equivalent of 43% of their income. In January 2009, this figure was 32%, and in January 2005 was 18%. In other words, that is an increase of almost 34% in debt in just three years, and 139% in the last seven years.
Still according to him, all of this was originally caused by the Central Bank’s monetary policy, which dumped a huge amount of money into the economy. He goes further: “It is therefore possible that a recession may occur in the current quarter or next“. But he says that the CB could avoid an economic recession (and the deflation of the current housing bubble) by adopting an expansionary policy, at the cost of inflation and an inevitable (and even harsher) economic recession in the future.