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The American middle class is falling deeper into debt to maintain a middle-class lifestyle.
Cars, college, houses and medical care have become steadily more costly, but incomes have been largely stagnant for two decades, despite a recent uptick. Filling the gap between earning and spending is an explosion of finance into nearly every corner of the consumer economy.
Consumer - Debt - Mortgages - Inflation - Mortgage
Consumer debt, not counting mortgages, has climbed to $4 trillion—higher than it has ever been even after adjusting for inflation. Mortgage debt slid after the financial crisis a decade ago but is rebounding.
Student debt totaled about $1.5 trillion last year, exceeding all other forms of consumer debt except mortgages.
Auto - Debt - % - Inflation - Decade
Auto debt is up nearly 40% adjusting for inflation in the last decade to $1.3 trillion. And the average loan for new cars is up an inflation-adjusted 11% in a decade, to $32,187, according to a Wall Street Journal analysis of data from credit-reporting firm Experian.
Unsecured personal loans are back in vogue, the result of competition between technology-savvy lenders and big banks for borrowers and loan volume.
Debt - Surge - Design - Byproduct - Borrowing
The debt surge is partly by design, a byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it, companies increasingly can’t sell their goods without it, and the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit.
In one sense, the growing consumer debt is a vote of confidence in the future. People borrowing money today expect to have the income tomorrow to pay it back. Consumer debt tends to rise when borrowers feel secure in their jobs.
Debt - Pile - Ledger - Risk - Unemployment
But the debt pile is also an accumulated ledger of economic risk. It should be manageable so long as unemployment remains low. If job...
(Excerpt) Read more at: MSN
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