Total U.S. household debt just surpassed $14 trillion for the first time ever, and credit card debt hit a new record, as well. These scary debt stats come from the latest report from the Federal Reserve Bank of New York.
As economist Heather Boushey noted… “In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don’t support.”
The optimism comes in because the stock market can’t seem to stop hitting new records, and the economy is prospering, so it’s time to spend, spend, spend – even if it’s money you don’t have.
Then the reality sets in as 8.36% of credit cards are now delinquent. Almost 5% of auto loans are at least 90 days overdue. And at least 12% of student loan borrowers are delinquent or in default.
For the moment, let’s ignore the fact that most people have forgotten that the balances in your market-based retirement accounts are “paper” – not “real” – wealth which will vanish with the next market crash.
Let’s focus instead on the lessons most people have forgotten from the last debt crisis. Americans were feeling flush from rising stock market and real estate values, and they were in hock up to their eyeballs.
