The quarterly reports concerning the national economy are bringing some negative aspects for the American life. The household debt jumped to record values. Almost all categories show a weak hold of financial management as far as citizens are concerned. Each of them contributed to a national debt that exceeded even the 2008 peak.
The First Quarter Experienced a Household Debt Acceleration
The concerning household debt started to increase ever since the year of 2013. A New York federal authority stated during an April presentation that 22.5% of loans were made on behalf of Americans aged 60. By comparison, this percentage was at 16% back in the last financial crisis of 2008. Nonetheless, this could represent a positive aspect. Senior citizens usually possess higher wealth than youngsters. Therefore, the default rate should be smaller.
Over the first quarter of 2017, the total amount of household debt reached $12.73 trillion. This figure is $149 billion higher than the financial situation at the end of 2016. These numbers appeared in a report that the Federal Reserve Bank of New York issued on Wednesday.
Auto loan delinquencies are among top sources of national economic drainages. Banks have already proceeded to discontinue partnerships with risky borrowers for car purchases. Late credit card payments are another concerning issue. Credit card balances stumbled on a 1.9% decrease last quarter. This marks the first time since 2008 when loan balances recorded values bigger than $12.68 trillion.
Authorities Don’t Have the Necessary Reasons to Declare Financial Crisis
Most debt categories suffered gaps that are larger than expected. For instance, auto loans dived from 6.4% to 9.2% while student loans reached 10.6% of total household debt even though a while ago they were at 4.8%.
Nonetheless, authorities don’t find these numbers as concerning as they sound. This is because the report didn’t go through an adjustment process to inflation and population size. Therefore, despite a tremendous household debt, the national economy is still away from trouble. This is because the indebtedness used to represent 85% of the economy in 2008. By comparison, the debt is now only a 67% part of the national economy.
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