This article was published by The McAlvany Intelligence Advisor on Wednesday, January 10, 2018:
Michael Snyder rivals only David Stockman in his pessimistic economic outlook, reflecting that outlook by naming his blog “The Economic Collapse.” On the first day of the New Year, Michael dug into his files for the most “crazy” numbers from 2017. He found 44, including these:
One out of every ten young adults in the United States has been homeless at some point over the past year;
The United States has lost more than 70,000 manufacturing facilities since China joined the WTO in 2001;
A total of 6,985 store locations were shut down last year, and we are expected to break the record again in 2018:
Only 25 percent of all Americans have more than $10,000 in savings right now; and
44 percent of all U.S. adults do not even have enough money “to cover an unexpected $400 expense,” according to the Federal Reserve.
What’s missing from Michael’s list? Credit card debt, student loan debt, and vehicle financing debt. Surely he was aware of these numbers, but for some reason didn’t include them in his list. For the first time in history, credit card debt last year hit $1 trillion, eclipsing the record set back in 2008 following the real estate collapse and the beginning of the Great Recession. Snyder didn’t mention the nearly $3 trillion in “non-revolving” debt (i.e., auto and student loans) either. Seeking Alpha called these numbers “scary” but Snyder ignored them.
A closer look behind the numbers reveals that these may not be such “scary” numbers after all. Perhaps that’s why Snyder ignored them, simply because, by his definition, they didn’t qualify as “crazy.” For one thing, fewer than 40 percent of all households carry any sort of credit card debt. Among millennials ages 18 to 29 only a third even have a credit card.
Next, the ratio of income to credit card debt at the end of 2017 (before the new tax cuts) was already declining with the ratio of credit card debt compared to the nation’s gross domestic economic output at about 5 percent, compared with 6.5 percent in 2008.
Also, credit card delinquencies remain way below the 9 percent historical average, at just 7.5 percent, and far below the rate of 15 percent touched following the 2008 financial crisis.
There’s another way to look at credit card debt: compare outstanding balances to incomes.ValuePenguin performed such a service, showing that households with annual incomes of between $25,000 and $100,000 have less than $7,000 in outstanding balances on their credit cards. Further, that analysis showed that the average has increased only slightly since 2013.
With almost two million more people working today than held jobs a year ago, and others enjoying wage and salary increases, that $1 trillion in credit card debt becomes far less “scary.” In a $20 trillion economy that is growing at three percent a year, $1 trillion in credit card debt may reflect that growth as banks are willing to issue more cards to more credit-worthy individuals and those individuals, having perhaps learned lessons from the Great Recession, are using them more prudently. That “trillion” dollar number may instead reflect a growing and increasingly healthy economy employing more people making more money who are using credit opportunities more wisely.
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Sources:
USAToday: Credit card debt hits new record, raising warning sign
SeekingAlpha.com: Credit card debt on watch
Michael Snyder: 44 Numbers From 2017 That Are Almost Too Crazy To Believe
ValuePenguin.com: Average Credit Card Debt in America: 2017 Facts & Figures
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