Still lot's of debt - too much to get the economy moving

"With all of the talk of the difficult borrowing environment and de-leveraging, very little debt is actually gone, despite massive write-offs by banks," Andy Matthes, portfolio manager at Matthes Capital, wrote in a recent letter to investors, a copy of which was obtained by MarketWatch. Most of this debt mountain is still tied to the fragile, government-supported housing market. At the peak of the real estate boom in 2006, U.S. households owed $9.8 trillion in mortgage debt. By the end of September, that had climbed to $10.3 billion.

Such high debt levels leave households with less cash available to spend on other things. With consumers typically accounting for two-thirds of U.S. gross domestic product, this situation should dent economic growth. However, personal consumption currently makes up more than 70% of GDP, well above the average of 66% since 1929, according to Matthes.

Consumption has likely remained high because of government transfer payments, which help people who have fallen on hard times through the social welfare system.