Rising credit card defaults highlight how household debt and higher borrowing costs can put pressure on consumers and the wider economy. It’s an important reminder to watch both credit quality and consumer spending trends.
Adjusted for inflation, population and real economic growth since 2019, the credit card balance increase isn't much of a story.
Can't deny the higher charge offs, but with unemployment still quite low by historical.standards, and a few rate cuts filtering through, its hard to see the wheels falling off that much.
Lau - I was that reader - "As one reader once pointed out somewhere in the comments section, card balances aren't that important if we pay them off at the end of each month—and what we should really be watching are delinquencies."
Thank you for keeping us up to date on this. I don't think I said that card balances aren't important, but just that delinquencies are more important. A 50% increase is indeed concerning. Inflation is still with us, and the poor and the middle class are really feeling the strain. The elite rich love it - their assets just go up and up.
But as you said, the banks are on thin ice - and you didn't even get into (this time) the huge paper losses they're sitting on in their bond portfolios. If things start to hit the fan, those paper losses will start becoming real losses.
When interest rates started rising, bond prices dropped. As an example, Bank of America's paper loss on its bond portfolio reached $110 billion as of March ‘24. I don’t have an update, but no doubt it’s still significant, even though interest rates have eased since then.
Biden & Powell created this mess by artificially inflating the cash supply with fiat currency & their great Covid Cash Giveaway. I have no doubt that the bubble is about to burst again, the current prices of homes for sale across the country is too high, like in 08, couple that with the emerging credit card default nightmare, and 2008 is starting to look like it was child’s play compared to what’s been swept under the rug by the current joke of an administration.
Rising credit card defaults highlight how household debt and higher borrowing costs can put pressure on consumers and the wider economy. It’s an important reminder to watch both credit quality and consumer spending trends.
Perhaps because we let credit-card interest rates rise too high? Historically, high interest rates have been associated with the downfall of a society: https://ancientwisdommodernlives.com/p/interest-rates-old-and-new-how-high
Adjusted for inflation, population and real economic growth since 2019, the credit card balance increase isn't much of a story.
Can't deny the higher charge offs, but with unemployment still quite low by historical.standards, and a few rate cuts filtering through, its hard to see the wheels falling off that much.
Lau - I was that reader - "As one reader once pointed out somewhere in the comments section, card balances aren't that important if we pay them off at the end of each month—and what we should really be watching are delinquencies."
Thank you for keeping us up to date on this. I don't think I said that card balances aren't important, but just that delinquencies are more important. A 50% increase is indeed concerning. Inflation is still with us, and the poor and the middle class are really feeling the strain. The elite rich love it - their assets just go up and up.
But as you said, the banks are on thin ice - and you didn't even get into (this time) the huge paper losses they're sitting on in their bond portfolios. If things start to hit the fan, those paper losses will start becoming real losses.
What would those real losses start to look like, I wonder?
When interest rates started rising, bond prices dropped. As an example, Bank of America's paper loss on its bond portfolio reached $110 billion as of March ‘24. I don’t have an update, but no doubt it’s still significant, even though interest rates have eased since then.
Biden & Powell created this mess by artificially inflating the cash supply with fiat currency & their great Covid Cash Giveaway. I have no doubt that the bubble is about to burst again, the current prices of homes for sale across the country is too high, like in 08, couple that with the emerging credit card default nightmare, and 2008 is starting to look like it was child’s play compared to what’s been swept under the rug by the current joke of an administration.