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

Another Month, Another Record for Consumer Debt

  by    0   0

Americans continue to drive the economy along spending money they don’t have. Consumer debt increased yet again in July, setting another record, according to the latest data released by the Federal Reserve.

Total consumer debt surged $23.4 billion in July, driven by a huge jump in credit card balances. The big rise in consumer indebtedness took analysts by surprise. Bloomberg said the increase “exceeded all estimates” in a survey of economists. Overall, consumer debt increased by an annual rate of 6.8% after a 4% increase the previous month.

Total consumer debt in the US now stands at a record $4.123 trillion (seasonally adjusted).

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

Revolving credit outstanding – primarily credit card balances – grew by $1o billion in July. That was the biggest jump in credit card debt since November 2017. Americans now owe some $1.o8 trillion on their credit cards.

Non-revolving credit, which includes auto and student loans grew by $13.3 billion.

Most mainstream pundits and analysts continue to spin the growth in American indebtedness as a positive for the economy. Here’s how Bloomberg reported it.

The surge in borrowing indicates Americans, supported by higher wages, were feeling confident enough about their financial situation to continue borrowing and spending. The economy, beset by weakness in manufacturing, housing and capital investment, remains highly dependent on the US consumer to keep driving the expansion.”

But does massive credit card spending really mean consumers are confident? It could just as well mean they are tapped out and charging everyday purchases on plastic. In fact, the growth in consumer debt could just as well mean Americans are struggling to make ends meet. After all, a lot of people use their credit cards as an emergency fund.

And even if this is some kind of confidence-driven spending spree, it can’t go on forever. Credit cards have this inconvenient thing called a limit. And they have to be paid off at some point. At best, “confident” American consumers are borrowing money from their future. What happens when the future gets here?

Even Bloomberg conceded there is a possible economic downside to all of this debt.

At the same time, bigger credit-card statements may indicate households feel they are overextended and may become more tentative about spending.”

WolfStreet put it in simplest terms when the Q2 consumer debt number came out last month:

American consumers are not slackers. They are doing their collective job, propping up the US economy, and by extension the global economy, with money they don’t have.”

Meanwhile, bankruptcies are increasing. While still well-below Great Recession, analysts say there is an uptrend. According to data released by the American Bankruptcy Institute, US bankruptcy filings rose by 3% in July 2019 from July 2018.

As Peter Schiff noted in a podcast after the Q2 GDP number came out, this notion that the US economy is strong is “fake news.” Consumer spending increased by 4.3% and contributed nearly all of the GDP growth. Many of the headlines credited the American consumer with “rescuing the economy.”

The problem is if the consumer rescued the economy, who is going to rescue the consumer? Because if you look at where the consumer is getting that money, it’s from credit. Year-over-year, consumer debt has increased by 5%. So, what is driving consumer spending is debt.”

This is not a sustainable way to run an economy.

Get Peter Schiff’s key gold headlines in your inbox every 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

Millions of Americans Struggling to Pay Their Bills

We read a lot about the big-picture impacts of the economic meltdown caused by the government response to the coronavirus pandemic. We hear about the millions thrown out of work, the surge in corporate bankruptcies and small businesses shutting down, and the specter of surging inflation. But how has all of this impacted the average […]

READ MORE →

Inflation Is Here

The mainstream isn’t worried about inflation. In fact, we’re told inflation is muted. And that’s true, at least by some measures. We haven’t seen the rising consumer price index (CPI) you might expect as central banks inject trillions of dollars created out of thin air into the economy. But just because government numbers don’t reflect […]

READ MORE →

The Stock Market Is Completely Untethered From Economic Reality

We’ve been saying for months that the stock market has completely disconnected from economic reality. The markets have hit record highs despite the economic chaos caused by the government response to COVID-19. As Peter Schiff put it in a podcast back in May, the markets are on a Fed-induced sugar high. In a recent article, […]

READ MORE →

Ranks of the Long-Term Unemployed Growing

The mainstream spin on unemployment is that things are improving. The unemployment rate is coming down. The number of weekly jobless claims recently fell below 800,000 for the first time since government lockdowns in response to the pandemic went into high gear last March. But there are some troubling signs that undercut this good-news narrative. […]

READ MORE →

Rickards: Why Gold?

Why gold? In a recent article, Jim Rickards offers three reasons the biggest gains in gold prices are yet to come.

READ MORE →

Comments are closed.

Call Now