Let’s see what I saved in the bankruptcy
grab bag this week.
Bankruptcy filings follow debt. Debt goes up, bankruptcy filings go up.
How high is our credit card debt now?
Maria Lamagna on the Market Watch site:
They now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report Monday released by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.
What was it that happened to the economy in 2008? Give me a minute.
Consumers are borrowing too much!
But, wait a minute, aren’t banks lending too much?
Revolving credit had been growing at an annual growth rate of 4.9%. One reason: More consumers are getting access to credit cards backed by major banks and issuers in recent months. More than 171 million consumers had access to those cards in the first quarter of 2017, the highest number that has had access since 2005, when about $162.5 million people had access.
Of course, it isn’t just credit card debt that is ballooning.
Household debt outstanding — everything from mortgages to credit cards to car loans — reached $12.7 trillion in the first quarter, surpassing the previous peak in 2008 before the effects of the housing market collapse took its toll, Federal Reserve Bank of New York data show. To put the borrowing in perspective, it’s more than the size of China’s economy or almost four times that of Germany’s.
What could go wrong?
“The average family of four is living paycheck to paycheck.”
For most Americans, whose median household income is lower than it was at its peak in 1999, borrowing has been the answer to maintaining their standard of living. The increase in debt helps explain why the economy’s main source of fuel is providing less of boost than in the past. Personal spending growth has averaged 2.4 percent since the recession ended in 2009, less than the 3 percent of the previous expansion and 4.3 percent from 1982-90.
Naturally, the folks I see borrow to make up for income shortfalls to cover their expenses.
Borrowing your living expenses means, you need to increase your income, or decrease your spending, or both, because, you cannot borrow your way out of a debt problem.
It just gets worse. As I say, the sand dune is built one grain of sand at a time.