Americans: The Increasing Consumer Debt Balance

An excerpt from the article, titled, “The State of the American Debt Slaves, Q4 2019“:

Consumer debt – student loans, auto loans, and revolving credit such as credit cards and personal loans but excluding housing-related debts such as mortgages and HELOCs – jumped by $187 billion in the fourth quarter 2019, compared to a year earlier, or by 4.7%, to a record $4.2 trillion, according to Federal Reserve data released Friday afternoon:

My Two Cents:

The concept of debt is amoral. Too many financial experts place a “bad” vs “good” label on financial products.(I will explore that in another blog). Debt can be used as leverage to obtain assets needed for a variety of reasons. In real estate, debt is used to acquire income producing property. Is debt “bad” in that instance? If one is not a real estate investor, let’s take the worker earning $50,000 per year. And they live in an area where public transit isn’t a viable option; is buying a car via a loan a “bad” thing?

The deeper issue isn’t if debt is “bad” or “good”, but more about why more and more debt is being used to acquire things. One of the reasons, in my estimation, is inflation. Albeit it’s not the only variable, but it plays a large part in this scenario. As the monetary base is expanded, the value of the currency declines, giving the illusion that prices of goods are rising. The amount of currency units to purchase that good has increased due to the declining value of the currency. Based upon this activity, consumers must work more jobs, and acquire more and more consumer debt to maintain a lifestyle.

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