February 6, 2023

Rising Consumer Debt & Interest Rates Are A Ticking Time Bomb

The Federal Reserve consumer debt figures include credit debt, student loans, and auto loans, yet do not factor in mortgage debt.

Rising consumer debts colliding with rising interest rates is really a ticking time bomb.

Over the last a few months, consumer debt has climbed at a steep, steady pace because Americans struggle with  rising prices . November was no different, with consumers piling on an additional $27. 9 billion indebted.

With the 7. 1% increase in consumer debt in November, Americans now must pay back a record $4. 76 trillion, according to  the latest data from the Federal Reserve .

This is a big problem for the Fed as it tries to battle rising prices with interest rate outdoor hikes. The inflation that the main bank created is driving people to go deeper in to debt. Meanwhile, the pumpiing fight is making debt more and more expensive.

The Federal Reserve consumer debt figures include credit card debt, student education loans, and auto loans, but tend not to factor in mortgage debt. When you include mortgages, US people are buried under more than $16. 5 trillion in debt.

Americans are operating up credit card balances at a dizzying pace. In Nov, revolving credit increased by $16. 4 billion. With this 16. 9% increase, People in america now owe nearly $1. 19 trillion in revolving debt.

To put the increase into viewpoint, the annual increase in 2019, prior to the pandemic, was a few. 6%. It’s pretty clear that with stimulus money long gone, Americans have considered plastic in order to make ends meet as prices continue to skyrocket.

The rapidly growing amounts of credit card debt should raise eye brows, but as  ZeroHedge   pointed out in the tweet, the real problem is the particular double whammy of rising debt and interest rates.

Average credit card rates of interest have eclipsed the record high of 17. 87%. The  average annual percentage rates (APR)   currently stand at 19. 59%.

NBC News reveals   just how much rising interest rates are costing indebted consumers.

Bankrate data shows it would get 16 years for someone to pay off the current average charge card balance of $5, 474 by making the minimum obligations at 19. 2%. At that point, they would have shelled out $7, 365 in interest by itself. ”

As economist Daniel Lacalle put it,   rising interest rates are on a crash course with a wall of debt .

Non-revolving credit, including car loans and student loans, rose simply by $11. 5 billion, a 5. 9% annual raise. That was slightly below October’s increase. Total non-revolving credit now stands at $3. 57 trillion.

The mainstream continues to spin rising indebtedness as a indication of a healthy economy.   MarketWatch   proclaimed , “ While some households are funding more to withstand inflationary challenges, economists see the growth as mainly a sign of strength in the economy. ”

But running up charge card balances month after month is not a sign of a healthful economy. In fact , it discloses the dysfunction in an economy that is addicted to artificially low interest and money printing.

The bottom line is that People in america continue to borrow at an excessive rate because they don’t have any various other way to make ends meet. People can not run up their Australian visa balance month after month to buy groceries when they are usually in “ very strong” financial shape. The stimulus bank checks are long gone. Savings are now being depleted. The average person has no choice but to pull out the plastic. Of course , this is not a environmentally friendly trajectory. A credit card has this inconvenient thing called the limit.

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