The last time that Americans had a combined credit card debt of over $1 trillion was in 2007 and just prior to the financial crash of 2008. That is until today where for the first time in a decade consumers have tapped into their revolving debt to where it is now equal to what it was just prior to the global banking crash.
Yet this is not the only parallel to 2007 for the U.S. economy as home prices also now appear to be in the same bubble environment as they were a decade ago, with prices at the same levels as at the height of the housing frenzy.
Unlike last month’s unexpectedly week consumer credit report, which saw a plunge in revolving, or credit card, debt moments ago the Fed, in its latest G.19 release, announced that there were few surprises in the February report: Total revolving credit rose by $2.9 billion, undoing last month’s $2.6 billion drop – the biggest since 2012 – while non-revolving credit increased by $12.3 billion, for a total increase in February consumer credit of $15.2 billion, roughly in line with the $15 billion expected.
However, while in general the data was uneventful, there was one notable milestone: in February, following modest prior revisions, total revolving/credit card debt, has once again risen above the “nice round number” of $1 trillion for the first time since January 2007. – Zerohedge
Unfortunately, consumer debt levels in 2017 do not stop here. In addition to low interest rates and cheap money re-vitalizing the housing bubble, Americans have also created massive debt bubbles in the automobile and education industries, with auto loan debt as well as student loan debt each above $1 trillion.
Then when you factor in the Fed’s balance sheet being five times what it was in 2008, and the U.S. government’s debt being double ($20 trillion) what it was at the time of the crisis, you see that the ability for the same infrastructures that saved the financial system 10 years are extremely limited in being able to do so again.
No one really knows how long the central bank and the government can keep these bubbles going as the cost of borrowing begins to rise, and foreigners are no longer willing to purchase our nation’s debt. But like in 2008, when the entire collapse came in less than a week’s time despite all the warning signs of its imminent occurrence, so to does it appear that everyone is once again asleep to any oncoming dangers, but this time they are far more leveraged in debt than they were just a decade ago.
Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.