Category Private Debt exploding

May 16 2024

American Households Hold Record Debt Q1 2024


Posted Originally on May 16, 2024 By Martin Armstrong 

Debt Burden

The New York Federal Reserve reported that American households set a new record after plummeting into $17.69 trillion of debt, a 1.1% ($184 billion) increase from Q4 2023. Worse, the number of delinquencies is rising as households struggle to make ends meet amid the cost of living crisis. Inflation is not waning, taxes are rising, and America’s debt burden has become utterly unmanageable.

Mortgage balances rose by $190 billion and reached $12.44 trillion by March. People are paying far more in interest alone than they have in recent years. Those who bought in the hopes of refinancing are not in a good position. Auto loan debt rose by $9 billion, reaching $1.62 trillion.

Americans have been attempting to pay off their credit card balances, with overall credit card debt declining by $14 billion to $1.12 trillion. Yet, that was close to a record-high for credit card debt and we tend to see balances lowered after the holiday retail spending spree ends. Consumers do not want to pay those 20%+ interest rates on cards but many are forced to do so simply to put food on the table.

InflationWarAidMeme

Delinquencies are rising – this is a major issue. It is difficult to crawl out of debt once someone is deep within the cycle. “In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups,” said Joelle Scally, regional economic principal within the Household and Public Policy Research Division at the New York Fed. “An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”

Credit card delinquencies have reached their highest levels since 2012 when America was recovering from the Great Recession. In fact, by the end of Q1 2024, around 3.2% of all outstanding debt was in delinquency. The New York Fed reported a rise in missed payments across all debts, including those 90 days past due.

No foreign nation is coming to offer America a bailout check. The Biden Administration has made it clear that American households are NOT Washington’s priority. We are to continue working and paying taxes in order to fund foreign wars and climate change packages. How else will we house those 7+ million illegal migrants and offer them free healthcare and shelter? How else will we pay off the student loans for millions? How else will we continue to grow the public sector and pay for countless new social programs? Americans are in serious debt, and Washington is all but ensuring this trend continues.

Dec 12 2023

The Second-Largest Contributor to US Private Debt


Posted originally on Dec 12, 2023 By Martin Armstrong 

Car in Driveway

The Federal Reserve Bank of New York’s data shows that auto loans have surpassed student loans, becoming the second-largest debt burden for U.S. consumers. Auto loan debt has reached $1.582 trillion, exceeding the $1.569 trillion in student loan debt. This surge in auto loan debt is attributed to rising vehicle prices, leading consumers to take out larger loans at higher rates.

Lenders have responded to this trend by tightening restrictions on auto financing, with approximately 30% of lenders reporting significantly tighter lending standards. The pressure for companies to switch to EVs and inventory shortages have contributed to the increase in vehicle pricing, resulting in consumers financing more expensive vehicles.

At the same time, the government is moving full speed ahead to reach their target of 50%+ EVs by 2030. Thousands of auto dealers have penned the Biden Administration to explain how this policy is significantly hurting their business. The public is drowning in debt over mostly gas-powered purchases, and EVs are significantly more expensive to purchase and maintain. Car manufacturers are focused on producing cars of the future rather than autos that fit the budget and lifestyle of the middle class.

Bidenomics believes student debt should be waived for those who knowingly took on the debt. Will those supporting Bidenomics also push to forgive this mounting auto debt? Like diplomas, people may realize their EVs cost more than they’re worth and they cannot keep up the payments. Perhaps the public, including those who do not own cars, should subsidize these car purchases through taxes since that is the same premise as student loan forgiveness.

The World Economic Forum is in partnership with global governments to end private car ownership by 2050. Owning a car is becoming an increasing luxury. Insurance costs could be a topic for another time as most states have seen their premiums skyrocket. Major cities around the globe like London and New York City are implementing congestion and traffic taxes as well.

Decades ago, someone could purchase a nice car with less than a month’s pay. Kelly Blue Book states that the average price of a new car was $48,008 as of March 2023, which is 27.8% more than pre-COVID pricing. The average cost of a crossover or SUV now ranges between $30,353 and $74,502, with costs rising by over 6% every year since 2020. We will see car ownership become an increasing luxury.