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

Indebted US Consumers Losing Confidence

  by    0   0

With debt up to his eyeball, the US consumer seems to be losing confidence in the US economy.

Last month, Spencer Schiff wrote an article warning about declining consumer confidence, writing, “any shift in consumer psychology/behavior could knock a critical support out from under our economy.”

In fact, consumer spending makes up about 70% of US GDP. If Americans stop shopping, the economy grinds to a halt.

Meanwhile, consumer debt continues to skyrocket. In effect, US consumers are propping up the US economy with money they don’t have.

Total consumer debt in the US now stands at a record $4.123 trillion (seasonally adjusted). In July (most recent data) Americans added another $10 billion to their credit card balances. It was the biggest jump in credit card debt since November 2017. Americans now owe some $1.o8 trillion on their credit cards.

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? Because based on the latest numbers, it doesn’t appear they are confident at all.

In fact, consumer confidence plunged in September. It was the biggest drop in nine months. The Conference Board index of consumer attitudes fell to 125.1, from a downwardly-revised 134.2 the month before. Analysts blame “the escalation in trade and tariff tensions” that we saw at the end of August. But the trade war has been going on for months. Could there be other reasons for this drop in confidence? Could it be because they are getting closer to maxing out those credit cards?

Credit card spending doesn’t necessarily mean consumers are confident about the future. 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.

Even if the US economy has experienced 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?

As Spencer wrote, “It may soon become apparent that consumer spending, currently our primary recession deterrent, has ground to a halt. If so, a serious economic downturn awaits.”

WhyBuyGoldNowBanner.070815.590

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

Chinese Gold Demand Continued to Surge in February

After ending 2022 on an upward trend that continued into January, Chinese gold demand surged again in February as the economy continues to rebound from government-imposed COVID policies. Gold withdrawals from the Shanghai Gold Exchange (SGE) totaled 169 tons in February. This is a reflection of strong wholesale demand and signals an ongoing rebound in […]

READ MORE →

The Exploding Budget Deficit Is Another Big Problem for the Federal Reserve

February has historically been a big budget deficit month, but the Biden administration still managed to overachieve and run the second-largest February deficit ever. The only time the US government has run a February deficit bigger than the $262.4 billion shortfall last month was in February 2021 in the midst of the COVID stimulus. This […]

READ MORE →

India’s Oil Deals With Russia Further Erodes Petrodollar Dominance

Every government policy has consequences – some intended and some unintended. There is at least one serious unintended consequence of the economic sanctions levied against Russia after its invasion of Ukraine – an erosion of the US dollar dominance.

READ MORE →

Credit Card Borrowing Spiked in January Even as Big-Ticket Spending Slowed

In January, retail sales came in much hotter than expected. Now we know how consumers paid for the spending spree. They put it on credit cards. After slowing modestly in December, growth in revolving debt spiked again in January. But a slowdown in non-revolving credit moderated the overall increase in consumer debt. Overall, this signals […]

READ MORE →

Solar Energy Production Could Require Most of the Global Silver Reserves by 2050

Silver demand was at record levels in 2022 and there is reason to believe it will continue to run hot over the next several decades. One reason is the rapidly increasing demand for silver in the green energy sector. In fact, an Australian study projects solar cells may use most of the world’s silver reserves […]

READ MORE →

Comments are closed.

Call Now