Economic indicators: consumer debt continues to grow, delinquency rises, students face "crippling debt"

Trump's economic statistics are all about stock growth and low unemployment numbers, but more than two thirds of the US economy is driven by consumer spending, so if you want to know where we're headed, you should be looking at the average American's ability to buy things.

That's where it gets ugly.

According to the latest Quarterly Report on Household Debt and Credit from the Center for Microeconomic Data at the Federal Reserve Bank of New York, household debt is up for the fifteenth consecutive quarter, standing at $13.21 trillion, while credit card debt delinquency is "increasingly notably" and auto loan delinquencies are "trending upwards."

This indebtedness isn't evenly distributed: millennials are the hardest hit, thanks almost entirely to student debt, which amounts to a lifelong tax on learning that has hit at such an unsustainable level that it's causing the US birth-rate to collapse.

The latest numbers put US student debt at $1.41 trillion, with 10% in delinquency, a misleadingly low number that doesn't factor in all the student debt in deferment that will become delinquent as soon as it comes due.

It's not looking good for seniors, either, who are declaring bankruptcy at record rates and who are unlikely to ever recover from their insolvency.

America is trembling on the verge of a subprime borrowing crisis that will collapse the ability of the public to keep up the spending that sustains two-thirds of the economy. The last time that happened, Obama and his friends decided to bail out the bankers instead of the borrowers, and it created ten years of instability and mounting inequality, and immiserated millions.

The next subprime crisis will likely be on Trump's watch. Anyone wanna guess who he is gonna bail out?

These unprecedented student debt levels are crippling the U.S. economy in multiple ways. Millions of these young people now have impaired credit ratings and cannot buy a home. That retards economic growth as household formation is a key driver of GDP as it increases consumption for things like washers, dryers, refrigerators, dishwashers and other large-ticket items. Moody’s Analytics previously estimated that each new household formed leads to $145,000 of economic activity.

Another negative impact is that debt-laden young people will be less likely to risk starting a new business – another engine of economic growth. One young woman, Amanda B., told the CFPB that she had “graduated with over 100,000 in student loan dept [sic] from citibank that has recently been sold to discover. I have been laid off twice since graduation, entering the job market in 2008 when things started going downhill, economy wise. I currently make 400 a week after taxes, and my student loan payment is 922 a month. That is over half of my monthly income. I have luckily been able to pay it up until my recent lay off, I have started a new job and will begin payments again in April. I cant even think about the amount of debt that I have without feeling sick to my stomach. And Ive told my parents not to expect grandkids until these are paid off. I have a dream of starting a business and I cant take that kind of risk with that debt. I went to college to follow my dreams and college debt seems to be keeping me from my future. It saddens me to think I would have been better off without my education.”

In August of last year, the U.S. Census Bureau reported that “A third of young people, or 24 million of those aged 18 to 34, lived under their parents’ roof in 2015. More young adults lived with parents than with a spouse in 2016. Almost 9 in 10 of the young people who lived with their parents a year ago are still living there.”

Financial Health of U.S. Consumer Will Determine Severity of the Next Recession [Pam Martens and Russ Martens/Wall Street on Parade]

(via Naked Capitalism)

(Image: Waterman)