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

Drop in Credit Card Spending Could Signal Problems in Economy Built on Consumer Debt

  by    0   0

Americans took on another $10.9 billion in debt in September, according to data released by the Federal Reserve. That pushed total consumer debt to a seasonally adjusted $3.95 trillion. American indebtedness is growing at a 3.3% rate.

But there are signs that American credit card borrowing is slowing down and that’s not good news in an economy built on consumer spending and debt.

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

The increase in consumer indebtedness came in well below what economists expected, signaling Americans might be slowing down their pace of spending as interest rates creep up. Credit card debt actually dropped in September. Revolving credit levels fell by $312 million. As Bloomberg put it, “That figure, which includes credit cards, shows consumers were staying cautious on running up such debt toward the end of the third quarter.”

The drop in revolving credit reversed a trend we saw over the summer. Revolving credit balances swelled by $4.8 billion in August after a $1.4 billion increase in July.

As Peter Schiff pointed out in a recent podcast, Americans taking on a lot of credit card debt is a bad thing in the long run, but not if you’re counting on the consumption to drive GDP. The American consumer can’t buy in America if they aren’t taking on debt.

If you see a slowdown in the accumulation of debt, it generally means people are not buying as much stuff.”

And while it’s true wages are rising, they are not increasing as fast as the cost of living. The American consumer is actually seeing a decrease in purchasing power.

Right now, to the extent that Americans are cutting back on their credit card debt is basically because they can’t afford anymore. They probably are maxed out and they don’t want more debt.”

An increase in non-revolving debt, which includes auto and student loans, made up for the drop in credit card spending. Non-revolving debt rose by $11.2 billion in September.

An increase in student loans accounted for the bulk of that increase. Student loan debt hit another all-time record high. Student loans outstanding rose by $33.2 billion in the third quarter. Peter said this is another negative for the US economy.

It just means that American students are that much deeper in debt. And of course, if they have more and more student debt, they have less ability to buy other stuff.”

A combination of students taking on more debt – meaning they have less purchasing power after they graduate – and consumers in general not being able to put more things on the credit card indicates both consumer spending and GDP will likely fall in the future.

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

Gold Hits New All-Time Record High

Gold hit a new all-time nominal high, surpassing the previous record set in December of the previous year. The precious metal’s price reached approximately $2,140, indicating a robust and continuing interest in gold as a safe-haven asset, despite a rather peculiar lack of fanfare from the media and retail investors. This latest peak in gold […]

READ MORE →

Is a Weak Yen Feeding the Global Gold Bull?

The gold price has been surging, with unprecedented central bank demand gobbling up supply. It has been a force to behold — especially as US monetary policy has been relatively tight since 2022, and 10-year Treasury yields have rocketed up, which generally puts firm downward pressure on gold against USD. 

READ MORE →

World Gold Council: “Blistering Central Bank Buying” Fuels Strong Gold Demand

Total gold demand hit an all-time high in 2023, according to a recent report released by the World Gold Council. Last week, the World Gold Council (WGC) released its Gold Demand Trends report, which tracks developments in the demand for and use of gold around the world. Excluding over-the-counter (OTC) trade, 2023 gold demand fell slightly from 2022 […]

READ MORE →

VIX – The Calm Before the Storm

The VIX, often referred to as ‘Wall Street’s fear gauge,‘ is currently portraying a sense of calm among investors, registering well below the 20 level. 

READ MORE →

Four States Consider Lifting Taxes on Precious Metals

Citizens of Georgia, Kentucky, Wisconsin, and Kansas may soon enjoy lower taxes on precious metals if recently introduced pro-metal bills are made law in 2024.

READ MORE →

Comments are closed.

Call Now