Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Americans Pile on More Debt; Outstanding Consumer Credit Approaching $4 Trillion

  by    0   0

Americans continue to bury themselves in debt.

US consumer credit rose by the largest amount in 11 months in October, as Americans piled on another $25.4 billion in debt, according to the latest consumer credit report by the Federal Reserve. Total consumer indebtedness is rapidly approaching $4 trillion, with Americans currently $3.96 trillion in the red.

October’s debt increase followed on the heels of an upwardly revised $11.6 billion increase in consumer credit in September. Year-on-year, consumer debt rose a seasonally adjusted 7.7%. American indebtedness was already at record levels before the latest increase.

The consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt.

Americans were burning up their credit cards in October. Revolving credit outstanding increased $9.2 billion. This despite increased borrowing costs due to rising interest rates. Credit card debt is climbing at an annual rate of 10.75%.

In a recent podcast, Peter Schiff said this is a sign the economy isn’t as robust as pundits keep telling us.

If an economy really is strong, you would think consumers would be taking on less credit card debt because they wouldn’t need it. They would be able to buy more stuff that they could actually afford. They wouldn’t have to go into debt. Because credit card debt is the worst possible debt because the interest rate is so high on credit card debt. If you can afford to pay off your credit card, you’re going to pay it off.”

Given the cost of carrying a high credit card balance, most people who do so do it because they don’t have a choice.

They don’t have the money. They can’t afford to pay the credit card bills when they come. And so all they do is pay the absolute minimum that you’re allowed to pay, and that means the balance never goes down. And so the fact that you’re seeing this surge in credit card debt, I don’t think that indicates the economy is good. I mean, some people think, ‘Oh yeah, when the economy is booming, people are more apt to go buy stuff.’ Yes. But not on credit. They’re more apt to buy stuff with their higher income, buy stuff that they can afford. If credit card debt is going up, it’s generally a sign that the economy is weak. People are desperate. They’re trying to make ends meet. The cost of living is going up faster than people’s paychecks. So, they are briding the difference using the only lifeline available to them – credit cards.”

Credit card debt will put an even tighter squeeze on consumers if interest rates continue to climb. Credit card APRs have increased by more than 3 percentage points over the past two years. The average rate now stands at 16.6%. That means consumers have to fork out an increasing amount of money each month just to cover minimum payments.

Non-revolving credit, including auto and student loans, climbed $16.2 billion in October. Outstanding student loans stood at $1.44 trillion at the end of the third quarter.

Consumer debt may well cross the $4 trillion threshold before the end of the year.

Consumers aren’t the only ones burdened by debt. The federal government in a massive debt spiral of its own. Corporate debt also stands at record levels. As Peter put it in a podcast earlier this fall, the economy is a bubble and the air filling that bubble is cheap money.

The bottom line is Americans are too broke to afford those higher rates. It’s everybody. It’s individual households, it’s corporations, it’s the government. And not just the federal government, but local governments and state governments. Everybody loaded up on debt when interest rates were low. People say, ‘I’ll take advantage of this. You’re a fool if you don’t go out and borrow money. Look how cheap it is.’ … So, we’ve built this so-called strong economy on a foundation of cheap money. So, if the economy is strong because interest rates are super low, and if interest rates go up, well now the economy can no longer be strong because that shaky foundation you built the economy on collapses and the whole house of cards comes tumbling down with it.”

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

More Cause for Concern: Retail Sales Tank

We have yet another reason to be concerned about the direction of the US economy. Earlier this month, we reported that the ISM index of national factory activity for September came in under 50 for the second month in a row. This indicates that manufacturing is contracting. The September ISM nonmanufacturing index wasn’t a whole […]

READ MORE →

Is the National Debt Really Just Money We Owe to Ourselves?

The national debt continues to spiral upward. It increased by another $1.2 trillion in fiscal year 2019. But Paul Krugman says it’s not that big of a deal. He downplayed the national debt in a tweet, claiming emphatically that “DEBT IS MONEY WE OWE TO OURSELVES.” This encapsulates a common Keynesian argument. Debt can’t really burden […]

READ MORE →

Are Americans Close to Maxing Out Their Credit Cards?

Consumers continued to pile on debt in August, according to the latest data released by the Federal Reserve. But credit card debt fell slightly, raising a troubling question: are consumers close to maxing out the plastic? Total consumer credit grew by another $17.9 billion in August. That represents an annualized increase of 5.2% and pushes […]

READ MORE →

Gold: An Anchor of Trust

gold barsCentral banks globally added a net 57.3 tons of gold in August, continuing a gold-buying spree that’s been going on for months. Countries like Russia and China are seeking to minimize exposure to the US dollar and undermine the ability of the US to weaponize the greenback as a foreign policy tool. But there are even […]

READ MORE →

Fed Set to Launch “Massive” Bond-Buying Program — In Other Words QE

The Federal Reserve is set to begin what a MarketWatch article called a “massive” bond-buying program. Jerome Powell announced the program last Tuesday and the central bank released more details about the plan on Friday. The Federal Reserve will buy $60 billion in short-term Treasury bills each month. According to a statement, the purchases will […]

READ MORE →

Comments are closed.

Call Now