Americans’ household debt surpasses $16T for first time

[Hydrogen]

Total household debt for Americans has risen to a record $16 trillion, according to a report from The Federal Reserve Bank of New York, as Americans grapple with inflation and rising costs.

“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices,” NY Fed researchers wrote in a blog post accompanying the report, released Tuesday.

The total rose 2 percent between the first and second quarters of 2022, or about $312 billion. This year’s $16.15 trillion household debt dollar amount is $2 trillion higher than what was recorded in pre-pandemic 2019.

Increases in mortgage and auto loan debt are reactive to rising home and auto costs, the researchers wrote, and the uptick in credit card debt shows the effect of inflation.

Mortgage balances were the biggest contributor to the $2 trillion increase, rising by $207 billion to $11.39 trillion total. Auto loans rose by $33 billion.

Credit card balances went up by $46 billion, one of the largest recorded by the NY Fed since 1999, “at least partly reflecting inflation on consumer goods and services purchased using credit cards,” the researchers wrote.

Non-housing balances — including credit card, auto and student loan debts — saw the largest increase since 2016, up by $103 billion.

The NY Fed reported student loan balances, at around $1.59 trillion, didn’t much fluctuate from the first quarter.

The report from the Federal Reserve Bank of New York drew from the New York Fed Consumer Credit Panel, a nationally representative sample of Equifax credit report data.

https://thehill.com/policy/finance/3584781-americans-household-debt-surpasses-16t-for-first-time/

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As new data is compiled, we are seeing interesting trends emerge.

Credit card balances went up by $46 billion, one of the largest recorded by the NY Fed since 1999

The above could validate rumors of americans using credit cards to buy food and other essential goods. Which is a frightening thought to consider.

Most americans believed it was impossible for these levels of inflation to affect us. We're still living in denial, that this is actually happening. We thought things like this only happened to other nations.

If we're to address these issues, we will need to adjust our perspective and way of thinking of things. It will take time. I'm not certain if time is a luxury we can afford.

[South Park]

The above could validate rumors of americans using credit cards to buy food and other essential goods. Which is a frightening thought to consider.

Most americans believed it was impossible for these levels of inflation to affect us. We're still living in denial, that this is actually happening. We thought things like this only happened to other nations.

If we're to address these issues, we will need to adjust our perspective and way of thinking of things. It will take time. I'm not certain if time is a luxury we can afford.

The US has a massive advantage over other countries, due to its world reserve currency status not only they can inflate away the money in the hands of their citizens but of all the people and the governments around the world holding dollars, this reduces their inflation at home and allows them to print more money than what it would be otherwise possible, and yet the inflation is this high, if the world reserve status of the dollar disappeared or at least it got weaker the inflation the average US citizen will have to endure will be many times worse than what we are seeing right now

[DrBeer]

I'm afraid that the statistics are not quite correctly formulated. It seems to me that this indicator includes the obligation for mortgage loans, auto loans, and "household" debt load. Otherwise, it turns out that households raised approximately $64,000 for food for each person. From a newborn to the most ancient old man. if we assume that this amount is formed as I described above, then the picture is not very scary - houses, apartments, cars are quite expensive acquisitions, and then everything looks logical. Yes, I do not argue - since 2020, COVID, and then the global crisis caused by the terrorist war unleashed by Russia in Ukraine, has led to an increase in the number of consumer loans for simpler purchases than a house.
On the other hand, the US is not so afraid of these trillions. The USA provides the whole world with DOLLARS. And 1-5-10 trillion is a drop in the global economy. This means that the government can print and give out this amount to the population, or pay off household debt to banks, or give out another aid to those in need .... And all this money will then flow into .. THE WORLD ECONOMY! Well, and an important clarification - now the military-industrial complex will start working at full speed in the United States - and these are real trillions in the form of a finished product, these are wages, these are jobs, these are insurances, these are taxes. So don't worry too much about the USA!

[Die_empty]

So don't worry too much about the USA!

Yes the American economy is solid enough to withstand the consequences of this record increase in household debt. But Americans should be concerned if the debt keep increasing because it might lead to crisis in the mortgage and banking sector.

[adaseb]

It’s normal for this figure to go up. Because everything cost more now and obviously people have more debts. But at the same time they are getting paid more to settle these debts.

The credit card balances I never understood because these days many credit card give you points and cash back for using them. So this is why many people only pay by credit card these days. And they have a balance but if it is paid every month then they don’t pay interest. So it shouldn’t be alarming to see this figure go up either.

[zasad@]

As long as the dollar is the world currency, then all the debts in the US economy are not so dangerous for the United States, because they print dollars. But the main problem is that many countries have already begun to abandon settlements in dollars and use national currencies. If this trend does not stop, then the dollar will have problems.

[Reid]

-snip
The above could validate rumors of americans using credit cards to buy food and other essential goods. Which is a frightening thought to consider.

Most americans believed it was impossible for these levels of inflation to affect us. We're still living in denial, that this is actually happening. We thought things like this only happened to other nations.

If we're to address these issues, we will need to adjust our perspective and way of thinking of things. It will take time. I'm not certain if time is a luxury we can afford.

Does this mean they are also not spending (cash)? Do they have money being kept somewhere? Like a storage or just inside the house?
Because before I remember the President urged his countrymen to spend more because more money are being kept at their savings. (sorry, I forgot who is the president at that time)
They keep on borrowing or using the credit card that suggests they have a balance in their bank or somewhere stored.
Because in my own way, I will not borrow that much or use the credit card as much as I like without knowing I have a basis to pay.

[virasisog]

It’s normal for this figure to go up. Because everything cost more now and obviously people have more debts. But at the same time, they are getting paid more to settle these debts.

The credit card balances I never understood because these days many credit cards give you points and cash back for using them. So this is why many people only pay by credit card these days. And they have a balance but if it is paid every month then they don’t pay interest. So it shouldn’t be alarming to see this figure go up either.

If a huge country like America is suffering from an inflation crisis, how much more people from the third-world country who don't have any credit cards to rely on? Debts are expected to increase since we're in the inflation crisis period where surviving is hard and providing our primary necessities is a struggle so borrowing would be the only option left for most of us. We can't blame our government because it's a global economic crisis.

[fiulpro]

Is it honestly something that is "Shocking" ?
-Pandemic
-Depression brewing
-Inflation
-New Pandemics trying to coming forth !

I do think that is very plausible that at the end of the day, these things can turn bad any second and Americans using " Credit cards" taking debts, etc would not only be shared amongst other people as well but it would actually be , very " common" since we are seeing recession and many people are loosing their jobs as well therefore it's honestly not a shock but government do need to take a step forth and help them out a bit.

[stompix]

If a huge country like America is suffering from an inflation crisis, how much more people from the third-world country who don't have any credit cards to rely on?

Well, aren't they safer cause not having a credit card means they can't access that easily a loan so they won't have debt? Just saying.
Of course, I already know that not being in debt won't be the main problem, as I've seen inflation over 50% and no credit card at that time and it wasn't a pretty sight.

I'm afraid that the statistics are not quite correctly formulated. It seems to me that this indicator includes the obligation for mortgage loans, auto loans, and "household" debt load. Otherwise, it turns out that households raised approximately $64,000 for food for each person. From a newborn to the most ancient old man. if we assume that this amount is formed as I described above, then the picture is not very scary - houses, apartments, cars are quite expensive acquisitions, and then everything looks logical.

They've spent more on average more with 200$ on credit, 200$ on car loans, and 1500$ on mortgage per citizen over 16 yo, so even the numbers are not that bad for spending, I think half of that was for real necessities as indeed some feel the pitch of higher prices for food and gas but the other was driven by the consumerism triggered by the return to "normal".

I think the bad part is somewhere else, and this is indeed a worrying sign, the amount of non-prime borrowers with unsecured loans.Fidelity has a better reach of this here.

since we are seeing recession and many people are loosing their jobs as well therefore it's honestly not a shock but government do need to take a step forth and help them out a bit.

Employment levels have constantly grown from the start of the year, no it's not a thing of people losing their jobs, besides, without a job the amount of credit you get is null.

[samcrypto]

Is it honestly something that is "Shocking" ?
-Pandemic
-Depression brewing
-Inflation
-New Pandemics trying to coming forth !

Those debt are already high even before the pandemic starts, US debt to China increased a lot over time and because of the pandemic, this add to their reason to get more funds. As long as their economy is good and their debt rate is still tagged as a good one, that can still be good but again recession are possible to get worst if those debt continues to right without any further solution. The market is rising, many countries are already suffering from a bigger inflation rate, if the US economy dumps again, many will surely be affected so let's all hope for the best.

[darewaller]

As long as the dollar is the world currency, then all the debts in the US economy are not so dangerous for the United States, because they print dollars. But the main problem is that many countries have already begun to abandon settlements in dollars and use national currencies. If this trend does not stop, then the dollar will have problems.

It is obvious that dollar lost a lot of value in the recent few years, but they also gained a lot considering how other currencies lost value as well. This is why I do not believe that people will turn towards what they could do with their own currency, makes sense in a small scale but doesn't make sense when you consider how risky it could become.

This is a very important task for USA which means that they need to make sure even if USD loses value, it doesn't lose value more than it loses in other fiats. That's an important aspect and should be regarded as such. Dollar could become something smaller but that doesn't mean that it would be a bad deal, as long as it's still better than bigger one.

[Kakmakr]

Well, a post pandemic consumer reaction was expected. You had loads of people that were locked up for weeks, not earning a salary and then you lift the lockdowns ...and guess what happens. People do not have disposable income to celebrate their "freedom".. so they go on a spending spree with credit cards. 

Now add to that inflated prices for the things that they are buying... and the debt created are higher than usual. This will go on, until the inflation drop... or until people start buying with disposable cash... and not with their credit cards. 

[Gyfts]

The stimulus money didn't go far enough. It was supposed to give compensation from the government due to lockdowns but a mere 2k USD for over a year of restrictions didn't make up for lost income. On top of that, inflation is outpacing wage increases.

As long as the dollar is the world currency, then all the debts in the US economy are not so dangerous for the United States, because they print dollars. But the main problem is that many countries have already begun to abandon settlements in dollars and use national currencies. If this trend does not stop, then the dollar will have problems.

The issue is that USD is no longer placing itself as an attractive currency reserve. The inflation rate is too high, and you're seeing a lot of countries reduce the amount of USD they hold in their reserves as a result. In addition to the sanction efforts by the U.S. (asset forfeitures), I don't really see USD being the world reserve currency for too much longer,

[Captain Corporate]

I have to say the best case right now for all of us is the fact that USA also faces the problems that we are facing. I do not have too much debt, its under one salary worth, so I would have to literlaly pay %70 of my salary and I would have zero debt. So thats not big at all. But I achieved that little amount by not buying anything at all, I live a life of dull taste, wake up, work, watch same netflix, sleep and keep doing that everyday while not eating anything even interesting, so my money goes nowhere outside of anything that gets broken in the house that needs replacing, or any hospital bills. Its good to know that Americans are like that too, they have debt, its good because nobody would care about people in Turkey and never did, which they should have, but they did not, but at least people will try to save Americans by fixing the world economy, and that will benefit us.

[Mauser]

That are some serious debt levels private households are facing in USA, which shouldn't be a big surprise. For years economics have warned about the rising debt levels as part of the low interest rate environment we have been living in since 2008. One big loan sector that is worrying are student loans. Going to one of the ivy league university means to start working with 250,000 USD student debt if your parents aren't rich. The next sector is the mortgage market, it's nearly impossible to buy a house or apartment with out a loan. Over the last 30 years property prices increased a lot whereas income only increased slightly, which can lead to people being in debt for more than 30 years. After inflation the average salaries remained pretty much constant whereas many cost increased. Also if you see the government printing money and issuing new loans each year it should be natural for the people to do the same. It's hard to stay out of the debt trap.

[NotATether]

Credit card balances went up by $46 billion, one of the largest recorded by the NY Fed since 1999

The above could validate rumors of americans using credit cards to buy food and other essential goods. Which is a frightening thought to consider.

We've always used credit cards to buy stuff in supermarkets!

But then again, if you're buying stuff with money that you don't have (credit), don't be surprised when you end up with a lot of debt.

[DrBeer]

I'm afraid that the statistics are not quite correctly formulated. It seems to me that this indicator includes the obligation for mortgage loans, auto loans, and "household" debt load. Otherwise, it turns out that households raised approximately $64,000 for food for each person. From a newborn to the most ancient old man. if we assume that this amount is formed as I described above, then the picture is not very scary - houses, apartments, cars are quite expensive acquisitions, and then everything looks logical.

They've spent more on average more with 200$ on credit, 200$ on car loans, and 1500$ on mortgage per citizen over 16 yo, so even the numbers are not that bad for spending, I think half of that was for real necessities as indeed some feel the pitch of higher prices for food and gas but the other was driven by the consumerism triggered by the return to "normal".

I think the bad part is somewhere else, and this is indeed a worrying sign, the amount of non-prime borrowers with unsecured loans.Fidelity has a better reach of this here.

Let's take a look at the statistics:
I'll take the most "noticeable part of the commitment" - real estate.

1. Today, the average cost of housing in America is 217 thousand US dollars. That's 3.6 times more than the median annual household income of $60,336. Across the country, real estate values ​​vary considerably, and in some states, owning a home is much cheaper than in others.
2. Owners of real estate in the United States spend an average of 1-4% of the value of the property per year on the maintenance and repair of housing. Average monthly housing costs in California are $600, in Florida $520, in New York State $560, and in Texas $700.

This is what I mean - $ 1,500 a month for housing, as I understand it, this is a mortgage. FOR the whole house. Which corresponds to the example of a 15-year mortgage, at $1,500 per month (including the mortgage rate).

It seems to me that for a family, even from 2 working people, this is not very much. I could be wrong, but it doesn't look too scary...

I have not heard about total unemployment in the USA, although I know that inflation "ate" part of the income. By the way, does the mortgage agreement take into account inflation? If not, then on the contrary it has become more profitable than before all epidemics and crises

[South Park]

That are some serious debt levels private households are facing in USA, which shouldn't be a big surprise. For years economics have warned about the rising debt levels as part of the low interest rate environment we have been living in since 2008. One big loan sector that is worrying are student loans. Going to one of the ivy league university means to start working with 250,000 USD student debt if your parents aren't rich. The next sector is the mortgage market, it's nearly impossible to buy a house or apartment with out a loan. Over the last 30 years property prices increased a lot whereas income only increased slightly, which can lead to people being in debt for more than 30 years. After inflation the average salaries remained pretty much constant whereas many cost increased. Also if you see the government printing money and issuing new loans each year it should be natural for the people to do the same. It's hard to stay out of the debt trap.

You said it yourself, getting indebted is a trap, now if the economy was relatively stable during a very long time then taking a commitment to pay for a house in 20 to 30 years would make sense, but since that is not the case indebting yourself over such a long period of time not knowing what it may happen and still lose your house at the end is a very strong possibility, which is what happened to a lot of people during the financial crisis of 2007, so with this in mind it is important to try to reduce the amount of time you spend while being indebted as you never know when a crash may be coming.

[Johnyz]

Credit card balances went up by $46 billion, one of the largest recorded by the NY Fed since 1999

The above could validate rumors of americans using credit cards to buy food and other essential goods. Which is a frightening thought to consider.

We've always used credit cards to buy stuff in supermarkets!

But then again, if you're buying stuff with money that you don't have (credit), don't be surprised when you end up with a lot of debt.

The convenience that credit card can give is good, but eventually if you will not pay that in full in time most probably you’ll be trap on that debt cycle and the interest will be in your account which can make the situation worst. Debt is the enemy of financial freedom, if you really want to live a happy life better to be debt free. US has been dealing with a huge since then, but looking at their debt grade, it looks like they can still afford to pay those debts but if left uncontrolled, more economic crisis will happen and many will suffer because of this.