environment for subprime lenders that thrive off low default rates and a stream of high- interest payments coming in the doors. Of course, this irresponsible lending can’t continue forever... Inevitably, irresponsible lending always leads to a bust. That’s when the Toms and Kates of the world can no longer hang on, defaulting in droves and crashing the stocks of the banks who lent them money. The next subprime bust is coming... It’s a matter of when , not if . Nearly four in five Americans are like Tom and Kate – borrowing like crazy today and sowing their financial downfall tomorrow. As you can see in the following graphic, total household debt continues to climb – up 18 quarters in a row – and is at a new all-time high... During the last financial crisis, total household debt peaked at $12.7 trillion. Today, that figure sits at $13.5 trillion... And
half of that increase – $400 billion – has come in the last year alone, according to the New York Federal Reserve. Mortgage debt is back up to $9.1 trillion... $200 billion shy of the peak reached during the last financial crisis. Since the beginning of 2008, auto-loan debt has risen 60% – from $810 billion to $1.3 trillion. And student- loan debt increased about 160% – from $580 billion to $1.5 trillion. Meanwhile, credit-card debt is now back at an all-time high of $870 billion, up nearly 20% over the past three years. Credit-card debt is growing so fast, it’s even outpacing strong wage growth – which, according to the Atlanta Fed, is around 10-year highs at 3.7%. Despite a strong economy with historically low unemployment rates, many people are still struggling... And they’re turning to credit cards to fund the difference.
HOUSEHOLD DEBT LEVELS
Mortgage Auto Loan
Credit Card
Student Loan
Other
$14 $12 $10
$8 $6 $4 $2 $0
2008 2010 2012 2014 2016 2018
American Consequences 67
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