In a concerning turn of events, U.S. consumers are piling up debt at an unprecedented rate as they struggle to cope with a rapidly deteriorating economic environment. Recent data from the Federal Reserve reveals that consumer borrowing spiked by $23.75 billion in November, with revolving credit (which includes mostly credit cards) soaring by nearly $19.5 billion – the third-highest monthly increase on record.
As a result of this debt binge, delinquencies have reached their highest level since 2012. Moreover, the average credit card interest rate is now over 20%, an all-time high that is causing many cardholders to carry balances for extended periods, further exacerbating their financial struggles.
The root cause of this debt explosion lies in the ever-increasing cost of living, widespread layoffs, and the surge in poverty and homelessness across the country. With over 60% of Americans living paycheck to paycheck, the need to rely on credit cards to make ends meet has become an unfortunate reality for millions of households.
Despite the claims of inflation being under control, the reality on the ground paints a different picture. A restaurant owner recently made headlines for charging $16 for a BLT sandwich, yet only making $2 on each sale due to rising ingredient costs.
Economist Cam Harvey, who discovered the Treasury yield curve’s ability to predict recessions, is confident that a downturn is likely in 2024. The yield curve inversion has preceded each of the last eight recessions and has not produced any false positives.
However, this looming recession is just the beginning of a much larger storm that threatens to engulf the entire system. Decades of poor decisions have set the stage for a “perfect storm” that could result in a complete meltdown of our economic and societal structures.
As we face these challenges, it is essential for individuals and policymakers to address the root causes of this debt crisis and work towards a more sustainable and equitable future.