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

US Consumer Debt Spiked in February

  by    0   0

Apparently, those stimulus checks weren’t enough. American consumers pulled out their credit cards and ran up big balances in February.

According to the latest numbers from the Federal Reserve, consumer debt unexpectedly spiked in February, growing at an annual rate of 7.9%. Economists had expected a small uptick in consumer debt after a flat January, but the sudden surge in credit card spending came as a surprise.

American consumers have piled up over $4.21 trillion in debt. This is slightly higher than the record $4.20 trillion in consumer debt as of February 2020 as the coronavirus pandemic began to grip the world.

The $27.6 billion increase in consumer debt in February was the biggest jump since November 2017.

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

Revolving debt, primarily reflecting credit card spending, jumped 10.1% in February. Americans now owe approximately $974.4 billion in credit card debt.

Through the pandemic, Americans, by and large, kept their credit cards in their wallets and paid down balances. This is typical consumer behavior during an economic downturn. Credit card balances were over $1 trillion when the pandemic began. Some pundits take renewed consumer borrowing and spending as a sign the economy is recovering. But Peter Schiff had a different take.

It looks like consumers are running low on stimulus money. As a result, they’re now spending money the old-fashioned way, they’re borrowing it.”

In other words, the sudden explosion in credit card spending could reveal consumer stress, not consumer confidence.

Even as credit card debt dropped during the pandemic, non-revolving credit, primarily auto loans and student loans, continued to expand through last year. The pace accelerated in February, with non-revolving debt growing by 7.3%. This compares with a 3.3% increase in January.

This is exactly what the central bankers at the Federal Reserve want to see – borrowing and spending. Fed Governor Lael Brainard spun the “strong” consumer credit numbers as good news.

We are seeing the kinds of financial conditions broadly that are very consistent with supporting the flow of credit to businesses and to households.”

But building an economy on debt isn’t sustainable and this entire “recovery” is predicated on consumers spending stimulus money borrowed and handed out by the federal government or running up their own personal debt.

Digging into the numbers reveals some more disturbing trends that the Brainards of the world would prefer not to think about.

Loans valued at $2 trillion entered forbearance during the pandemic. As of the end of Q1 2021, over 60 million Americans had skipped $70 billion in debt payments owed. At some point, they will be forced to pay the piper.

Meanwhile, 1-in-10 subprime auto loan borrowers are 60 days or more late on payments. That’s the highest number on record.

There are also signs of trouble in the housing market.  Subprime mortgage delinquencies remain at record high levels. And the full extent of the problem is masked by forbearance programs.

In the investment world, margin lending has surged. As of late February, investors had borrowed a record $814 billion against their portfolios, according to data from the Financial Industry Regulatory. Margin lending is at the fastest annual clip since 2007 and it’s up 49% from the previous year.

In an interview with Barron’s David Rosenberg, chief economist at Rosenberg Research, warned that the debt isn’t sustainable, saying “everything we’re seeing is temporary.” He projects a slowdown in economic growth by the fourth quarter.

‘Everybody’s focused on the reopening party,’ Rosenberg told Barron’s. ‘My mind goes back to the Fed not being able to raise rates because of leverage,’ he says, referring to corporate debt and the Fed’s inability to lift interest rates above 2.5% during its last tightening cycle, only to immediately follow with rate cuts leading up to the pandemic. ‘And now that leverage is on steroids.’”

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

US Senator Allegedly Bribed With Gold

Last week, a federal grand jury indicted Democrat Senator Bob Menendez and his wife Nadine Arslanian Menendez on bribery charges. According to the indictment, the senator and his wife took bribes, including 13 gold bars, from three New Jersey businessmen with Egyptian ties.

READ MORE →

Japanese Go on Gold-Buying Spree as Price Inflation Runs Rampant

With price inflation running rampant in Japan, Japanese households are rushing to buy gold. The sudden surge in demand, along with the devaluation of the yen, has driven the price of gold to record highs in yen terms.

READ MORE →

Banks Borrowed Another $2.2 Billion from Bank Bailout Program in August

The Federal Reserve continues to bail out US banks as the financial crisis that kicked off last March continues to smolder behind the walls. Banks borrowed an additional $2.2 billion from the Federal Reserve’s bank bailout program in August. This was on top of the $3.7 billion they borrowed in July.

READ MORE →

The Ticking Time Bomb Gets Closer to Zero as the National Debt Quietly Blows Past $33 Trillion

Do you hear that? It’s a ticking time bomb. Last Friday, the national debt quietly blew above $33 trillion. As of September 15, the outstanding federal debt stood at a cool $33,044,858,730,468.04.

READ MORE →

US Government Runs Budget Surplus in August But It’s Not Really Good News

The federal government charted a surprising budget surplus in August. But don’t be fooled. The feds didn’t miraculously fix their deficit problem. The Biden administration continued to spend money at an unsustainable pace last month. The surplus was merely a function of the reversal of student loan forgiveness.

READ MORE →

Comments are closed.

Call Now