US consumer debt surge can't outpace wages forever

US consumer debt surge can't outpace wages forever

American consumers are currently taking out debt at a far faster rate than their real incomes or the US economy is surging, and America might be hitting a fresh high in employment.

US consumers have run up more than $1 trillion on credit cards, reaching a level not observed since January 2009 and up 6.2% from the previous year. By the way, wages are up less than 3% and the American economy is surging just under 2% a year.

Student as well as car loans are also at $1-trillion-plus levels and also surging twice as fast as  wages or the US economy.

The overall percentage of disposable income the average household requires to service debt is approximately 10%, close to all-time minimums. The same applies to interest rates. By the way, when interest rates change at extremely low levels, small increases in absolute terms imply huge increases in proportional ones.

Fed tightening, and also both balance sheet as well as interest rate variety will just serve for the purpose of straining liquidity conditions and raising debt service costs. 

 

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