The next several months looks extremely rough for the US economy. We are beginning to see the worrying results of inflation and high interest rates on Consumer spending, debt and delinquency.
Delinquencies on credit card loans have risen to 3.1% at the end of 2023, and it has made a sharp pivot upwards in 2024.
https://fred.stlouisfed.org/series/DRCCLACBSEven more concerning – and it’s a risk that not many are paying attention to – is that delinquencies at smaller banks (blue) have catapulted to nearly 8%, hitting levels that’ve never been seen before.
https://finimize.com/content/more-americans-are-defaulting-and-no-ones-paying-attention“Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,” said Wilbert van der Klaauw, economic research advisor at the New York Fed. “This signals increased financial stress, especially among younger and lower-income households.” Serious credit card delinquencies increased across all age groups, notably with younger borrowers surpassing pre-pandemic levels.
https://www.newyorkfed.org/newsevents/news/research/2024/20240206There's no way costs and debt are manageable for people. I earned $110k last year minus investment income, and my net on that was $80k. The bite from car payments, rent, food, gas, household items, entertainment, etc. is outrageous. I've got a payment on 2024 VW Atlas Cross-Sport of $1,300 a month, and that's just one of my automobiles. Rent is $2,000, gas is $250, food is $350-400, Home Entertainment/Internet is $150, and Medical is $300. Let's also add $5,000 for Miscellaneous. That's $60,000 for the year plus other expenses. I've also got other expenses that I didn't include like a mortgage on residential properties. There's no way Americans are seeing good economic conditions. Unemployment could drop to 1% and it'd mean nothing. We are seeing unmanageable debt cause jobs don't cover the costs for people unless they're living with their parents. Household expenses increased by 5k between 2022 and 2023.
The FED knows there's a crisis looming among personal and commercial debt holders. There's going to be pain as defaults and foreclosures increase around the country. There won't be a soft-landing for most Americans. The Fed merely wants to maintain altitude until Election Day.
