The latest data is out from the Federal Reserve Bank of New York on household debt. They observed that overall household debt has substantially increased and is nearing the pre-crash peak of 2008.
Consumer debt issues go in cycles. We have a crash, followed by a tightening, then slow relaxation of credit and a build up of consumer debt again. After that it’s pretty much rinse, lather, repeat.
And if we want a free market economy with little control over Wall Street, this is just the way it’s always going to be.
In the crashes that occur, the average American will get ground up in financial pain. That’s just the way it is.
So what type of debt is exploding? Data shows it is a 1.6% increase in mortgage debt, 1.9% increase in auto loan balances, a 4.3% increase in credit card balances, and a 2.4% percent increase in student loan balances.
Key points in the data:
- Auto loan balances continued their steady rise and auto loan originations for 2016 reached a new annual record in the 18-year history of this series.
- Credit card balances increased and the aggregate credit card limit increased for the 16th consecutive quarter.
- Student loan balances increased – marking an increase in every year throughout the 18-year history of this series.
The early warning signs are showing that both student loan debt and auto loan debt are getting to be more of a concern with creeping delinquency rates.
This is discouraging for people in the debt relief industry since there are not as many good solutions for these types of debt as there is for unsecured credit card debt.
So which flavor of debt is the most desirable to consumers, student loan debt.
I’m certainly not going to tell you the sky is falling but what I will say is a whole lot of good people are going to be chewed up and spit out by the cycle as it plays out. The combination of being house poor, having a big car payment, and overloaded in student loan debt is not going to be pretty to watch.
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