The Current Events Room
4 pillars of debt
America has a debt problem. Both the government and the private sector. This article focuses on the latter.
Read the entire article at the link.By breaking down what that debt is, you can best understand how to navigate the world of finance, understand your own portfolio better and make more sound investments.Here they are:
Overall Household Debt.
The state of household debt, which literally takes into account the combined debt within a given household, continues to flash red. According to a 2017 household financial survey by the Fed, “About one-quarter of U.S. adults have no retirement savings. And 41% say they would not have enough savings to cover a $400 emergency expense.”
The overall level of consumer debt has hit a new record. It’s now $618 billion higher than it was at its prior peak at $12.68 trillion during the third quarter of 2008 – right before the onset of the financial crisis.
The total borrowing of Americans hit $13.29 during the second quarter of this year. That’s up $454 billion from a year earlier. The fact is that borrowing has risen for 16 consecutive quarters.
Credit Card Debt.
The total of U.S. credit card loans has increased by $45 billion this year to a massive $829 billion total.
Despite cheap rates for banks, the average credit card interest payment rate is 15.5%. It was at 12.5% only five years ago. And, yet people keep borrowing.
The total revolving credit card debt now stands at a record of $1.04 trillion, higher than its last 2008 peak.
Borrowers have paid a painful $104 billion in credit card interest and fees in just the last year. That figure is up 11% from the prior year, and up 35% over the past five years.
What you should know if you have a credit card is that if the Fed continues to raise rates, that any associated debt will become even more expensive.
Student Loan Debt.
During my meetings in Washington and with even media figures, student debt continues to be a central topic of concern. The fact is, student loans cannot be given bankruptcy status and therefore are much more complex when evaluating the U.S. economy.
Currently, the amount of student loans grew to $1.41 trillion in the second quarter of 2018. That figure has nearly tripled since the beginning of the financial crisis. Student loan debt is now the second highest consumer debt held.
That crippling amount of debt makes it harder for graduates to find jobs that will help them alleviate the costs of their education. It also means that those with student loans will have less money to deploy into the economy — which will impact economic growth overall.
Auto Debt.
While the rising cost of manufacturing autos has impacted the automotive sector, it has not deterred consumers from borrowing money.
Total auto debt in the U.S. has shot up to $1.24 trillion. That figure is up $48 billion from just a year ago.
The reason this sector is so important now is that a lot of loans being given are of the subprime variety. Subprime loans were the exact kind of high rate loans that caused the last financial crisis — only last time they were given to mortgage borrowers.
Auto loan delinquency rates are already higher now than they were during the financial crisis. The auto loan sector will continue to be one to watch for signs of financial faltering.
As we head into the holiday season, these four debt triggers matter even more.
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Originally Posted by Tahuyaman
