Consumer deleveraging has barely even started, says Payout Trader editor and Crisis Strategy Alert senior analyst Charles Delvalle. According to the Fed Flow of Funds report released on Wednesday, household debt as a percentage of disposable income has fallen from 123% to 120%. That’s 2004 levels. But it’s a far cry from the 83% level in 1995.

When consumer debt is high, the only way to increase consumer spending is by (a) increasing the consumers’ take home pay or (b) forgiving a portion of consumer debt (which isn’t even guaranteed to prevent a default on that debt).

This year alone, over 2.9 million Americans have lost their jobs. So expecting a better paying job is out of the question. The government is already searching for ways to increase taxes, so we doubt consumers will get any significant tax cuts. And considering Team Obama is so keen to protect the banks, chances are they aren’t going to be pardoning consumer debt.

Let’s be frank. Consumers aren’t making more money this recession. And what money they do have will be spent to pay off their debt. That means discount retailers – the ones that sell everyday items for cheap – will lead the retail sector for some time to come. One of the best is Dollar Tree, Inc. (NASDAQ: DLTR).