Credit Card Debt Soars to Record Levels
Chart of the Week #31
I don't know if Trump is going to try and replace Fed Chair Jerome Powell, especially given his recent comments like saying he'd keep him "if he thought he was doing the right thing.”
But one of the reasons I wish he would—apart from his role as head of the institution that has caused more harm than anything else to this once-great nation—is Powell’s intellectual dishonesty.
There are too many examples to mention, but one that always stands out is his "strong economy" spiel. Rarely would there be a meeting where Powell wouldn’t emphasize the supposed strength of the economy. In fact, just weeks ago, he did it again, describing the U.S. economy’s recent performance as “by far the best of any major economy in the world.”
Now, of course, one of the biggest telltales that our economy is a lot weaker than Chairman Powell would like us to think is debt.
I’m not talking about government debt—which, as I wrote earlier this week, just broke above $36 trillion—but consumer debt.
The truth is that American consumers are drowning in a sea of debt, and nowhere is this more obvious than with credit card debt. New data from the latest consumer debt report by the Federal Reserve Bank of New York shows that credit card balances hit $1.17 trillion in the third quarter of 2024.
This is the highest balance on record since 1947. As you can see in today’s chart below, credit card debt surged during the pandemic and has continued climbing ever since—all under the watchful eyes of Biden and Powell.
Now, this isn’t a sign of confidence in the “strong economy”—far from it. It’s a desperate attempt by consumers to keep their heads above water in an economy where wages haven’t kept up with the rising cost of living.
Unsurprisingly, credit card delinquencies are also up from the previous quarter. In fact, they’ve more than doubled since 2021.
Ignoring this reality is outrageous. This alone makes me want to see Powell’s smug face out of the picture. Not that I expect his replacement to be much better.
Enjoy the rest of your weekend!
Lau Vegys
P.S. In case you were wondering, Powell’s official term doesn’t end until mid-2026.
Of course credit card debt and mortgages and car loans are up, because prices are higher. But income is up too, (recently)- “Although household balances continue to rise in nominal terms, growth in income has outpaced debt,” said Donghoon Lee, Economic Research Advisor at the New York Fed."
As for the 3.5% delinquency rate, I saw a graph last week (don't remember the source) showing that 3.5% is historically rather low. So the Fed is right - the economy is doing alright. (so far) - but I agree that there's a reckoning or a reset coming...