The surge in credit card defaults, surpassing 2008 Crisis levels, underscores a concerning financial landscape. Historical savings trends have reversed, contributing to over $1 trillion in credit card debt—a twofold increase in a decade. US consumer debt hit a staggering $17 trillion in 2023, reminiscent of pre-2008 conditions. Despite a relative decrease in mortgage debt, the housing market faces challenges, with the affordability index at its lowest since the 1980s. Home prices doubling since 2012, coupled with 20-year-high mortgage rates, make homeownership increasingly unattainable. Depleted pandemic savings and a significant drop in the savings rate compound the issue. While debt payments relative to income remain low, the intricate web of rising debt, falling savings, and housing struggles paints a worrying economic portrait, challenging the optimism held by some economists.
Credit card defaults are rising FASTER than the 2008 Financial Crisis
The situation is worse than you think…
A thread 🧵 pic.twitter.com/ecASPwfcsg
— Game of Trades (@GameofTrades_) November 14, 2023
3/ This shift in saving behavior has led Americans to amass over $1 trillion in credit card debt
2x the amount from 10 years ago pic.twitter.com/nCEjCihh4R
— Game of Trades (@GameofTrades_) November 14, 2023
5/ But, while mortgage debt is a large part of total debt, it's relatively lower compared to 2008
This suggests other factors are contributing to the financial strain many feel today pic.twitter.com/XEtSgRkXxQ
— Game of Trades (@GameofTrades_) November 14, 2023
7/ Home prices that have nearly 2x since 2012 and mortgage rates at 20-year highs, have made it extremely expensive to buy a home pic.twitter.com/gBPvNY6MgT
— Game of Trades (@GameofTrades_) November 14, 2023
9/ Today, the personal savings rate has dropped significantly
While in the '60s and '70s, the savings rate exceeded 10% pic.twitter.com/Ab1nptnGOy
— Game of Trades (@GameofTrades_) November 14, 2023
11/ But it only considers incomes, not savings
— Game of Trades (@GameofTrades_) November 14, 2023
13/ With credit card interest rates at their highest EVER, surpassing 21%
The cost of carrying this debt is nearly 2x what it was just a few years ago pic.twitter.com/FYC0gtnJkx
— Game of Trades (@GameofTrades_) November 14, 2023
15/ In fact, the rate of change in credit card defaults is now the fastest ever
Having risen 50% from just a year ago, surpassing even the Financial Crisis levels pic.twitter.com/jNB4gTllez
— Game of Trades (@GameofTrades_) November 14, 2023
17/ Americans are saving less and less money for emergencies and relying more on credit card debt
This is happening while the recession probability, predicted by the yield curve, is around 60%
What happens if there is a recession? pic.twitter.com/ijLCtZ1qcc
— Game of Trades (@GameofTrades_) November 14, 2023
19/ Thanks for reading!
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— Game of Trades (@GameofTrades_) November 14, 2023