Americans Are Facing Record-Setting Debt
American's total household debt has reached a record-setting new high.
This article is more than 2 years old
The American Dream has come to be defined by debt. United States citizens go into debt to buy a house, to buy a car, to go to college, or even take out credit cards so they can afford extravagant purchases like high-end televisions or the latest gadgets in tech. In general, year over year American household deficits just keep increasing. According to CNN, that number has now reached an unfathomable new high.
The Federal Reserve Bank of New York reported on Tuesday that American household debt has reached a total of $15.24 trillion. The new number was calculated after the total household deficits rose 1.9% between the close of the 2nd fiscal quarter and the beginning of the 3rd. The increase amounted to a total of $286 billion in additional debts.
According to a research officer at the Federal Reserve Bank of New York Donghoon Lee, the reason for the sudden spike in American debt is largely due to the world opening up as COVID-19 restrictions continue to become more and more relaxed. During the pandemic, the opposite was true, as people favored paying down debt instead of acquiring more. However, since people are now being let out of their figurative cages, they are going overboard with spending as they indulge in their newly found freedom.
Outrageous spikes in inflation due to supply chain constraints aren’t helping the steeply increasing national deficit either. Prices of absolutely everything imaginable are going through the roof. People are now even paying premiums for their snack foods. The producer price index (the index that measures the growth in the costs manufacturers pay for supplies) rose a staggering 8.6% over the duration of a 12-month period. That exponential increase directly correlates to the vast increases in the consumer price index. Essentially businesses want to maintain their profit margins and are only willing to compromise so much, so inevitably if the price they pay for something goes up, then the price everyone else pays for that something goes up as well.
Even though inflation rates are continuing to reach new highs, highs that are expected to continue well into 2022 and potentially into 2023, they aren’t doing anything to deter people from dishing out their dough. American mortgage deficits now total $10.67 trillion as the housing bubble continues to expand. Auto loans hit $28 billion, which is impressive considering the lack of car availability at present. And Student loan debt is currently sitting at a total of $14 billion, which is also impressive considering that college enrollment rates have been on a concerning decline since the onset of the pandemic.
Circumstances relating to inflation and the public’s over-arching post-pandemic desire to spend are both heavily contributing to the stark increase of the nation’s total combined household deficits. At this point, the lingering effects of these circumstances remain uncertain. However, these conditions are eerily similar to those that were in place before the great recession hit in 2008. It is unclear if the United States is poised to endure a similar situation once again after the dust settles, but what is clear is that the nation is currently in a bubble, and bubbles burst.
