As of February 16th, 2023 consumer debt in the U.S. has reached a historic high of 16.9 trillion dollars. This is over 1 trillion dollars higher than last year, 1.3 trillion dollars in particular. This increase mainly comes from the 11.9 trillion dollar increase in mortgage balances and very high-interest rates. These major increases show the massive extent of the consumption factor in the U.S. economy and how it is still constantly growing and expanding.
When looking at the specifics of why this increase happened one of the most important things, as I have previously mentioned, is the mortgage market. Serious delinquency mortgage loans of 90 days or more, which are known to be one of the worst-owned mortgage loan types, went up 0.57%. This is double the percentage from 2022 and is an overall negative in terms of the future of the housing market and consumer spending. Auto loans were also affected this past year as these loan delinquencies rose as well to 2.2% and credit card debt jumped as well. All of these different debts heavily contributed to the overall debt increase in consumption.
The Fed attempted to fix current inflation problems, the main issue of why this debt happened, and raised its benchmark rate seven total times over the past year. These benchmarks raised the borrowing rate and boosted rates for items that cause debt such as credit cards and a variety of loans. As the Fed continues its advances at lowering the inflation rate it will have to begin to consider how it is affecting the people and the spending rates in our country or else it might bite them later on.
Article- Consumer debt hits record $16.9 trillion as delinquencies also rise (cnbc.com)
With inflation continuing to rise more than expected it seems the problems with national debt will not be resolved any time soon. It will be interesting to see if any policies are used to try and correct the problem with consumer debt specifically, outside of the lowering of interest rates once the inflation rate slows down in the future.
ReplyDeleteI wonder with these trends if debt will just continue to rise along with the housing market. And are wages rising along with it?
ReplyDeleteThe benchmark rise of interest rates 7 different times by the Fed in short term is a key indicator in which consumers in U.S love to spend! Its honestly crazy how much an individual is willing to rack up on their credit cards and accrue short-term debt. I guess the question is...if we want the Fed and inflation rates to decline soon, then when will we stop spending?
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