Everything is great. We’re riding high. The stock market is up. Employment is up. Analysts and pundits see nothing but smooth sailing ahead.
It sounds an awful lot like 2007.
It’s like deja vu all over again.
As an article published at The Conversation pointed out, there were two key problems lurking below the surface in the mid-2000s that few people paid any attention two. Those same two factors exist today. And once again, few people are paying much attention.
- Excessive household debt
- A housing bubble
How an Economy Grows a…
Best Price: $2.49
Buy New $5.89
(as of 09:35 EDT – Details)
Looking back at the mid ‘oos, the economy seemed to be chugging along. But inflation-adjusted household incomes were lower than they were in the late 1990s. To maintain their standard of living, people took on more debt. At the time, it wasn’t a problem. Interest rates were still low thanks to the Federal Reserve’s monetary policy in the wake of the dot-com bust. Underwriting standards were also low. Banks and credit card companies were happy to loan money, even to people with marginal creditworthiness.
As a result, household debt soared from just over $8 trillion in 2004 to $12.69 trillion in 2008.
Fast forward to today. Household debt has now risen above pre-crisis level. Last month, the New York Fed released the latest data on US household debt, revealing it has grown to a record $13 trillion.
Non-mortgage household debt (credit cards, student loans and auto loans) has risen 41% above its previous peak in 2008.
The Real Crash: Americ…
Best Price: $6.99
Buy New $10.97
(as of 01:35 EDT – Details)
And of course, when you have debt, you have to service that debt. Analysts at The…