Hanging on

Wages stalled but costs haven’t, so people increasingly rent or finance what their parents might have owned outright.

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, 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 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.

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.

One thought on “Hanging on

  1. What happens in a Capitalist economy when buyers run out of money to spend?
    The system collapses.
    Capitalists lend, factories are built, products are produced and people buy those products…….if they have the money.
    That cycle repeats and repeats.

    It repeats until consumers run out of money because their wages are too low to participate in the game any longer.

    Then they are loaned money by the Capitalists, based on their future wages, to continue to buy shit.

    Eventually the Capitalist system collapses because there’s not money or credit in the world to keep the system afloat.

    Unless wages are dramatically increased and debt is dramatically reduced the end is nearer then we think.

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