Has The Final Meltdown Of The U.S. Consumer Now Begun?

News Image By Michael Snyder/Economic Collapse Blog February 07, 2024
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According to the New York Fed, total household debt in the United States increased by 212 billion dollars during the fourth quarter of 2023.  It is now sitting at a grand total of 17.5 trillion dollars.  

I suppose the good news is that we aren't 34 trillion dollars in debt like the federal government is.  But 17.5 trillion dollars is still really bad, and it is far more than U.S. households can handle.  Unsurprisingly, delinquency rates have started to spike, and I fully expect this trend to intensify in the months ahead.

Let's start by taking a look at credit card debt.  During the fourth quarter, it hit a brand new all-time record high of 1.13 trillion dollars...

Americans are increasingly turning to their credit cards to cover everyday expenses, with debt hitting a new record high at the end of December, according to a New York Federal Reserve report published Tuesday.

In the three-month period from October to December, total credit card debt surged to $1.13 trillion, an increase of $50 billion, or 4.6% from the previous quarter, according to the report. It marks the highest level on record in Fed data dating back to 2003 and the ninth consecutive annual increase.

The average rate of interest on credit card balances is now way above 20 percent, and so it has been very foolish of us to run up so much credit card debt.

And now millions of Americans are falling behind on their payments.

In fact, it is being reported that credit card delinquencies "surged more than 50% in 2023"...

Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.

Debt that has transitioned into "serious delinquency," or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported.

As delinquency rates rise, lenders will be forced to become more stingy, and that means that U.S. consumers will have less money to throw around.

The New York Fed is also telling us that delinquency rates on auto loans are surging too...

In the case of auto loans, delinquency rates are now above pre-pandemic levels "and the worsening appears to be broad-based," New York Fed researchers wrote.

"Loans opened during 2022 and 2023 are, so far, performing worse than loans opened in earlier years, perhaps because buyers during these years faced higher car prices and may have been pressed to borrow more, and at higher rates," they wrote. Increased delinquency rates "merit monitoring in the months ahead, particularly with the amplified distress shown by borrowers in lower-income areas."

This is exactly what we would expect to see if the U.S. economy was plunging into a recession.

A lot more Americans are having trouble paying their bills these days, and as the economy slows down throughout the rest of 2024 that is just going to make matters even worse.

One of the reasons why Americans have been relying on their credit cards so much is because virtually everything has become so much more expensive.

At this point, even a trip to McDonald's has become financially painful...

The CEO of McDonald's admitted Monday that the sales for the fast food giant have dipped amid increased menu prices that have not gone unnoticed by customers.

The Chicago-based chain has taken heavy criticism over its Big Mac combo that is priced at nearly $18, among other menu hikes, and has promised to focus on affordability, the New York Post reported.

"I think what you're going to see as you head into 2024 is probably more attention to what I would describe as affordability," McDonald's CEO Chris Kempczinski said on an earnings call with analysts.

In 1996, you could get a Big Mac for just 99 cents.

Things sure have changed since then.

I never imagined that we would be reminiscing about the "good old days" of the 1990s, but here we are...

I also miss the days when it seemed like there was a bank branch on just about every corner.

Once upon a time it was so easy to set up a bank account that even a kid could do it.

But now banks all over the nation have gotten into big financial trouble and they are shutting down branches at a staggering rate...

Bank of America has emerged as a front-runner in the ongoing elimination of costly brick-and-mortar banking locations in the US.

It said it would shut almost 160 last year and having already announced 30 in the first month of 2024 alone, there are no signs the trend will slow.

A total of 139 scheduled bank branch closures were made public in January - more than the monthly average across 2023, according to their regulator.

The Federal Reserve is doing all that it can to try to prop up the system, but I still expect another wave of bank failures in 2024.

In this sort of an environment, I think that it is wise to not have all of your eggs in one basket.

We really are moving into wild and unpredictable times, and no financial institution is 100 percent safe.

If you have spread your assets around, that will help mitigate your risk.

Of course most Americans don't actually need to spread their assets around because they hardly have any at all.

According to one recent survey, 60 percent of all Americans have 500 dollars or less in their checking accounts.

That means that most of us are living right on the edge of financial disaster, and we are collectively piling up more credit card debt with each passing day.

The stage is set for the final meltdown of the U.S. consumer, and it will be truly horrifying to watch it play out.

Originally published at The Economic Collapse Blog

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