Debt-pocalypse Beckons As US Consumer Bankruptcies Do Something They Haven't Done In 7 Years

Tyler Durden's picture

Submitted by Michael Snyder via The Economic Collapse blog,

When debt grows much faster than GDP for an extended period of time, it is inevitable that a good portion of that debt will start to go bad at some point.  We witnessed a perfect example of this in 2008, and now it is starting to happen again.  Commercial bankruptcies have been rising on a year-over-year basis since late 2015, and this is something that I have written about previously, but now consumer bankruptcies are also increasing.  In fact, we have just witnessed U.S. consumer bankruptcies do something that they haven’t done in nearly 7 years.  The following comes from Wolf Richter

US bankruptcy filings by consumers rose 5.4% in January, compared to January last year, to 52,421 according to the American Bankruptcy Institute. In December, they’d already risen 4.5% from a year earlier. This was the first time that consumer bankruptcies increased back-to-back since 2010.

 

 

However, business bankruptcies began to surge in November 2015 and continued surging on a year-over-year basis in 2016, to reach a full-year total of 37,823 filings, up 26% from the prior year and the highest since 2014.

Of course consumer bankruptcies are still much lower than they were during the last financial crisis, but what this could mean is that we have reached a turning point.

For years, the Federal Reserve has been encouraging reckless borrowing and spending by pushing interest rates to ultra-low levels.  Unfortunately, this created an absolutely enormous debt bubble, and now that debt bubble is beginning to burst.  Here is more from Wolf Richter

The dizzying borrowing by consumers and businesses that the Fed with its ultra-low interest rates and in its infinite wisdom has purposefully encouraged to fuel economic growth, if any, and to inflate asset prices, has caused debt to pile up. That debt is now eating up cash flows needed for other things, and this is causing pressures, just when interest rates have begun to rise, which will make refinancing this debt more expensive and, for a rising number of consumers and businesses, impossible. And so, the legacy of this binge will haunt the economy – and creditors – for years to come.

Despite all of the economic optimism that is out there right now, the truth is that U.S. consumers are tapped out.

If the U.S. economy truly was doing great, major retailers would not be closing hundreds of stores.  Sears, Macy’s and a whole host of other big retailers are closing stores because those stores are losing money.  It truly is a “retail apocalypse“, and this trend is not going to turn around until U.S. consumers start to become healthier financially.

We also see signs of trouble in the auto sales numbers.  Compared to 2016, sales were way down in January this year

Compared to January last year, car sales collapsed for all three US automakers, and the largest Japanese automakers didn’t do much better:

  • GM -21.1%
  • Ford -17.5%
  • Fiat Chrysler -35.8%
  • Toyota -19.9%
  • Honda -10.7%
  • Nissan -9.0%

For all automakers combined, car sales sagged 12.2% from a year ago.

A lot of attention is given to our 20 trillion dollar national debt, and rightly so, but a similar amount of attention should be paid to the fact that U.S. households are collectively more than 12 trillion dollars in debt.

About two-thirds of the nation is essentially living paycheck to paycheck.  Most families really struggle to pay the bills from month to month, and all it would take is a major event such as a job loss or a significant illness to plunge them into financial oblivion.

In America today we are told that the secret to success is a college education, but most young Americans have to go deep into debt to afford such an education.

As a result, most college graduates start out life in the “real world” with a mountain of debt.  And since many of them never find the “good jobs” that they were promised, repayment of that debt becomes a very big issue.  In fact, the Wall Street Journal has discovered that student loan repayment rates are much worse than we were being told…

Last Friday, the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers.

 

When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country.

 

The new analysis shows that at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.

If you do find yourself deep in debt, a lot of families have found success by following a plan that was pioneered by author Dave Ramsey.  His “Debt Snowball Plan” really works, but you have to be committed to it.

Getting out of debt can be tremendously freeing.  So many people spend so many sleepless nights consumed by financial stress, but it doesn’t have to be that way.

Most of us have had to go into debt for some reason or another, and not all debt is bad debt.  For example, very few of us would be able to own a home without getting a mortgage, and usually mortgages come with very low interest rates these days.

But other forms of debt (such as credit card debt or payday loans) can be financially crippling.  When it comes to eliminating debt, it is often a really good idea to start with the most toxic forms of debt first.

It has been said that the borrower is the servant of the lender, and you don’t want to spend the best years of your life making somebody else rich.

Whether economic conditions turn out to be good or bad in 2017, the truth is that each one of us should be trying to do what we can to get out of debt.

Unfortunately, a lot of people never seem to learn from the past, and I have a feeling that both consumer and commercial bankruptcies will continue to rise throughout the rest of this year.

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junction's picture

O/T: When Gordon Duff blasts Donald Trump, you know that something is wrong with Trump.  That ill-planned raid in Yemen to allegedly grab computer hard drives was insane.  The NSA can hack into any computer connected to the Internet.  All manufactured computers have backdoors built in and all recent Intel and AMD chips are easy enough to take over remotely.  Even if your computer is in a Faraday cage-type enclosure, I wouldn't be surprised if the NSA also has the ability to tag all computers in an area, once they are turned on. Trump did one great thing, he defeated satanist Hillary Clinton.  How she is still alive with her terminal case of vascular dementia is an important question.  Is Hillary getting injections of pineal gland hormones harvested from babies kept in suspended animation until black ops CIA brain surgeons do their demonic work?  Your guess is as good as mine.  Trump: "If you need a thief, take him from the gallows." [Yiddish proverb]  

http://www.veteranstoday.com/2017/02/05/neo-delegitimizing-evil/

Bay of Pigs's picture

Gordon Duff sucks a bag of dicks.

PresidentCamacho's picture

And washes it down with foreskin pureee

Never One Roach's picture

Trump will save the middle class consumers by creating jobs if he wins. It's a tough battle against all odds since woof Bitzer is still in a daze...people still hear him mumbling that Hillary's chances of winning are better then 98% ......

And then there's Obama's Legacy:

Dying Sears Just Had One of the Most Shockingly Disastrous Months in Its History

https://www.thestreet.com/story/13969600/1/dying-sears-is-having-one-of-the-most-disastrous-weeks-in-its-history.html?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

 Dead bodies and skeltons all over the place worldwide.

 

 

TeethVillage88s's picture

Big Business and Big Spokes-person combined create = Big Idiots.

Systemic Monsters = Big Systems, Systems of Systems, Complexity breads errors and weakness.

Monopolies are weak since they are led by a Cult of Personality at the Top... Stalin... Mao... Mark Zuckerberg... Bill Gates... Dick Fuld... Sandy Weil (Citibank)

But let us remember Robert Rubin, Larry Summers, Alan Greenspan, Timothy Geithner, Ben S. Bernanke... Bill Clinton

And the Psyops or Counter-intelligence operations of Bill Clinton and our Congress:

Deregulation Plans, Transportation, Energy, Communication, Finance, Free Trade, Campaign Finance

1964 - Gulf of Tonkin, Congress gives up War Powers, Legislative Powers, and Budget Powers
1971 - Smithsonian Agreement, decoupled USD from gold standard,
1973 - War Powers Resolution (Allows 60 days combat/war without congressional declaration)
1974 - Federal Energy Administration Act of 1974 (R. Nixon)
1978 - Bankruptcy Reform Act of 1978,
1980 - Depository Institutions (J. Carter, followed by S&L Crisis, 5000 convictions, RTC)
1981 - Executive Order 12287, (R. Reagan, removed price controls on Petrol)
1982 – Garn–St. Germain Depository Institutions Act
1984 - Caribbean Basin Initiative (Free Imports to USA)
1985 - Plaza Accord
1987 - Louvre Accord
1992 - Energy Policy Act (H.W. Bush)
1994 - NAFTA, Deregulation of Trade, 3 Nations (W. Clinton)
1995 - Community Reinvestment Act, the Clinton Admin urged flexibility,
1995 - HUD advocated greater involvement of state and local organizations
1996 - Energy (W. Clinton, followed by ENRON Scandal)
1996 - Telecommunications Act (W. Clinton, cross ownership)
1997 - M2 Money Velocity Top
1998 - Clinton's Kosovo War (over 60 Days)
1998 - Brooksly Born Rejected on her concerns on OTC Derivatives
1998 - Derivatives expanded and were not regulated
1998 - Citicorp & Travelers Insurance Merger
1999 - Gramm–Leach–Bliley Act (Phil Gramm, followed by 2008 Financial Crisis)
1999 - bombing campaign in Kosovo
2000 - Commodity Futures Modernization Act of 2000 (P. Gramm)
2002 - Sarbanes-Oxley Act of 2002
2002 - McCain–Feingold Act, soft money unlimited
2005 - Energy Policy Act (subsidies, excluded clean air Water acts)
2005 - BAPCPA 2005
2005 - CAFTA-DR Ratified,
2008 - 2014 QE & LIRP/ZIRP (B. Bernanke, J. Yellen, B Obama)
2008 - 2012 H. Clinton Emails, known to Executive Branch
2009 - 2014 Continuing Resolutions
2010 - Citizens United v. Federal Election Commission
2011 - US combat in Libya (over 60 days)
2014 - lift ban on crude oil exports (Commodities Deregulation)

Timeline:

1930 - creation of BIS to ease foreign exchange rates for German Reparations?
1933 - decoupled from domestic gold standard,
1933 - Securities Act of 1933 and the Glass-Steagall Act (GSA),
1939 - 1945 World War II
1944 - Bretton Woods Conference (United Nations Monetary and Financial Conference)(to regulate the international monetary and financial order)
1944 - creation of International Bank for Reconstruction and Development (IBRD)(World Bank).
1944 - creation of IMF,
1956 - Bank Holding Company Act of 1956 (BHCA)
1963 - 1974 US-Vietnam War coupled with federal budget problems, Gold Standard,
1970s - "Big Three" Auditing Agencies Fitch Group, S&P's, Moody's regulate banks
1971 - Smithsonian Agreement, decoupled USD from international gold standard,
1985 - Plaza Accord
1987 - Louvre Accord

GUS100CORRINA's picture

As you look at the data below, remember the KEYNESIAN program "CASH FOR CLUNKERS" from the not too distant past? In that program, all FUTURE DEMAND was pulled forward from the FUTURE and everyone rejoiced. Well it looks like that FUTURE time period has arrived. Another FAILED OBAMA PROGRAM with delayed consequences. OBAMA is the only president in the history of the nation to have never achieved a 3% growth rate for GDP during his entire two terms while at the same time increasing US Debt by 100%.

=== Car Sales Data ===

Compared to January last year, car sales collapsed for all three US automakers, and the largest Japanese automakers didn’t do much better:

  • GM -21.1%
  • Ford -17.5%
  • Fiat Chrysler -35.8%
  • Toyota -19.9%
  • Honda -10.7%
  • Nissan -9.0%
Thoresen's picture

UK has a proposed cash for diesel clunkers on the cards. Correcting one government cock-up with another.

brown_hornet's picture

They sold Craftsman. The only reason I went in there. I used to love Sears. Now its like a morgue.

Déjà view's picture

Consumer does as 'Feral' Govt does...

Legalize ink jet printer currency for all!

lakecity55's picture

Yes, a brilliant move. Not.

 

blown income's picture

I borrowed a neighbors router over the weekend,  still had the box and I knew those colors ..Made in USA.

Zorba's idea's picture

Last I checked, vast majority of tool manufacturers are off shored primarily in china. call trump to fix this!

max_leering's picture

Gordon and the rest of the clown posse at VT are a bag of dicks... those CIA warmongering vermin were ABSOLUTE cheerleaders for the Hildabeast from start to finish, and now have no way forward except to slam DJT... and they all look like fools

Jethro's picture

Dang, you post all that shit and then tie it off with a Yiddish proverb.  That was something special.

Giant Meteor's picture

Belly laughs, thanks ...

Ralph Spoilsport's picture

Gordon Duff? I thought he was too busy these days being a gourmet chef, wine connoisseur, ambassador to the gray aliens for Dick Cheney, head of a large multi-national security firm nobody's heard of but they can tell you what you had for breakfast, the list goes on forever. That Gordon Duff? Either Duff is the biggest troll in the intel community or he lost touch with reality several years ago.

Obadiah's picture

Isn't "Gordan Duff" one of his aliasss?

johngaltfla's picture

Don't be shocked when the USD goes 100% digital with 95% compliance as I wrote about a few weeks ago. Once that happens, bankruptcies become rare as the Fed and Banksters simply increase monies to the debtors then seize it, freezing their lifestyles and spending at existing levels but damaging their ability to borrow and conduct any logical sort of financial transactions in the future.

Bay of Pigs's picture

The coming reset will be ugly. Paid for RE, gold, silver and hard assets will shine again. Paper will get shredded.

Jethro's picture

Anything shiny might get outlawed.  Hard to be an ant in a nation of grasshoppers.

stacking12321's picture

good luck with the feds seizing my bitcoins, which were lost in a digital boating accident.

Zoomorph's picture

Bitcoins will be worth less than paper money when TSHTF. You can't use them to wipe your ass.

stacking12321's picture

you are a pretender to knowledge, you talk like you know the future, but you don't.

none of us knows exactly the sequence of events that will happen when the system starts to come unglued.

there may be internet outages in some places for some times, but i'm willing to bet the internet is too valuable to people and the companies that do business on it, to go away permanently.

nightshiftsucks's picture

That would be when the riots and hangings start,ain't going to happen.

pherron2's picture

I don't know. I hear a lot of young people who think that s a great idea. I just get blank stares when I try to explain reality

TradingTroll's picture

Yeah in that book the Fourth Turning, issued 1991, the authors basically predicted that the younger generations would steal the wealth of their parents.

The book didn't use the term snowflakes but that's what we are calling them

CJgipper's picture

Steal it, or take it back?  Look at home prices versus incomes.  I'd argue that the senior generation stole from the younger generations via money printing.

Countrybunkererd's picture

ponzi's are a bitch at the end.

it is more than the FED, look at the retiring government "employees" who were given FAT pension plans before many of us were even working or born and are seemingly going to pay for all of it.  It is everywhere. 

gatorengineer's picture

what choice are they going to have?  This stopped being an issue of whether, and is simply a case of when...  After thinking it through, Trumps unleashing the banks, MAY give the system another 5 years of palliative care, its very very likley that is why it was done...

 

Point two, There isnt much paper fiat in circulation.  When capital and currency controls hit, they will limit you to $20 a day in cash, but you can make as many transactions electronically as you choose....

Countrybunkererd's picture

reminds me of the "reason 17" article where the IRS took back the refund money spent elsewhere.  It is our money, we give you serfs, i mean worker bees, i mean citizens back what we deem you need to produce for us... They can have a shit sandwich (you smart phone/ ebanking payers can be their servant if you want), i will work so little that i will not pay taxes but enough to survive, or not.

MattPSU02's picture

Google the time that the food stamp SNAP EBT card system stopped working, and the grocery stores started giving out food rather than face riots in their stores.  Then people rushed in to claim more food than they had money for in their accounts.  

Zorba's idea's picture

Its about time "We the People" solve TRIFFIN's PARADOX!  How is it possible for the USA!USA!USA! to run a balance of payments current account deficit AND surplus...at the same time???....without taking bread out of the mouth of labor.  The Feds are cannibalizing America's middle class to prop up USD as the sole reserve currency.  All we're left with is this stinking fiat!

A rope leash's picture

The rent is too damn high.

Houses Depreciate's picture

Yet "the rent" is half the monthly cost of buying at current grossly inflated asking prices of resale housing.

Killdo's picture

it's a sure-sign of a shit country when nobody can afford to buy a place. Not so long ago any grad could buy a place in any of world's main cities - I bought one in London and 3 in other places. 

Dragon HAwk's picture

That chart is a pretty limp dicked chart porn Example.

Giant Meteor's picture

I'm thinkin it will slowly at first,  then suddenly,  get hard ..

TeethVillage88s's picture

Delinquency Rates are not officially a problem. If the data is to be held valid.

(Below is a table from Federal Reserve DRCLACBN which shows no real change from Qtr 3) Nada. No Change.

Delinquency Rate on Consumer Loans, All Commercial Banks (DRCLACBN)
Q3 2016: 2.11 Percent, Not Seasonally Adjusted, Quarterly,
Nov 29, 2016
https://fred.stlouisfed.org/series/DRCLACBN

https://www.federalreserve.gov/releases/chargeoff/delallsa.htm (report, Lagging Data, but official Report)

Real estate loans Consumer loans Leases C&I loans Agricultural loans Total loans and leases
All Booked in domestic offices All Credit cards Other
Residential 1 Commercial 2 Farmland
2016:3 2.69 4.30 0.87 1.79 2.06 2.29 1.86 1.03 1.58 1.35 2.06

The G19 Report total credit.
https://www.federalreserve.gov/releases/g19/current/

https://www.federalreserve.gov/releases/chargeoff/delallsa.htm

Charge-Off Rate on Consumer Loans, All Commercial Banks (CORCACBN)
Q3 2016: 1.77
Percent, Not Seasonally Adjusted, Nov 29, 2016
https://fred.stlouisfed.org/series/CORCACBN

Charge-Off Rate on Credit Card Loans, All Commercial Banks (CORCCACBN)
Q3 2016: 2.86 Percent, Not Seasonally Adjusted, Nov 29, 2016
https://fred.stlouisfed.org/series/CORCCACBN

Father ¢hristmas's picture

Niggas are broke these days.

Giant Meteor's picture

ain't got no change ...

 

Oh, and Christmas is canceled until further notice ...

Kprime's picture

Niggas be broke...

there fixed it

max2205's picture

Print and lie!