Vanguard's Gus Sauter on Why the Recovery Could Take Years

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The biggest roadblock holding the economy back right now is deleveraging. Household debt as a percentage of disposable income increased from 59% in 1960 to 130% in 2007. As consumers pare that debt back down to sustainable levels, money that used to be spent on goods and services now goes to debt repayment, fueling less growth than we were used to in the past. That's the simplest, but probably most complete, way to describe why the economy is slow, and why it could stay slow for years.

I recently sat down with Gus Sauter, chief investment officer of the Vanguard Group, one of the world's largest investment companies. He added a unique twist to the deleveraging argument, noting that aging demographics changes how much debt U.S. households can maintain compared with the past. Have a look:

What do you think? Share your thoughts in the comments section below.

At the time this article was published Fool contributorMorgan Houseldoesn't own shares in any of the companies mentioned in this article. Follow him on Twitter, where he goes by@TMFHousel.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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