Why America Is Heading Straight Toward The Worst Debt Crisis In History

Authored by Michael Snyder via The Economic Collapse blog,

Today, America is nearly 70 trillion dollars in debt, and that debt is shooting higher at an exponential rate.

Usually most of the focus in on the national debt, which is now 21 trillion dollars and rising, but when you total all forms of debt in our society together it comes to a grand total just short of 70 trillion dollars.  Many people seem to believe that the debt imbalances that existed prior to the great financial crisis of 2008 have been solved, but that is not the case at all.  We are living in the terminal phase of the greatest debt bubble in history, and with each passing day that mountain of debt just keeps on getting bigger and bigger. 

It simply is not mathematically possible for debt to keep on growing at a pace that is many times greater than GDP growth, and at some point this absurd bubble will come to an abrupt end.  So those that are forecasting many years of prosperity to come are simply being delusional.  Our current standard of living is very heavily fueled by debt, and at some point we are going to hit a wall.

Let’s talk about consumer debt first.  Excluding mortgage debt, consumer debt is projected to hit the 4 trillion dollar mark by the end of the year

Americans are in a borrowing mood, and their total tab for consumer debt could reach a record $4 trillion by the end of 2018.

That’s according to LendingTree, a loan comparison website, which analyzed data from the Federal Reserve on nonmortgage debts including credit cards, and auto, personal and student loans.

Americans owe more than 26 percent of their annual income to this debt. That’s up from 22 percent in 2010. It’s also higher than debt levels during the mid-2000s when credit availability soared.

We have never seen this level of consumer debt before in all of U.S. history.  Just a few days ago I wrote about how tens of millions of Americans are living on the edge financially, and this is yet more evidence to back up that claim.

Right now, Americans owe more than a trillion dollars on auto loans, and we are clearly in the greatest auto loan debt bubble that we have ever seen.

Americans also owe more than a trillion dollars on their credit cards, and credit card delinquency rates are rising.  In fact, in some ways what we witnessed during the first quarter of 2018 was quite reminiscent of the peak of the last financial crisis

In the first quarter, the delinquency rate on credit-card loan balances at commercial banks other than the largest 100 – so at the 4,788 smaller banks in the US – spiked in to 5.9%. This exceeds the peak during the Financial Crisis. The credit-card charge-off rate at these banks spiked to 8%. This is approaching the peak during the Financial Crisis.

The student loan debt bubble has also surpassed a trillion dollars, and the average young adult with student loan debt has a negative net worth

Despite economic and stock market gains over the past nine years, many young adults are still struggling to get ahead in their financial lives and, in some ways, things may have actually gotten worse.

Americans age 25 to 34 with college degrees and student debt have a median net wealth of negative $1,900, according to a report analyzing 2016 Federal Reserve data released Thursday by Young Invincibles, a young adult advocacy group. That’s a drop of $9,000 from 2013, YI’s analysis found.

Meanwhile, corporate debt has doubled since the last financial crisis.  Thousands of companies are so highly leveraged that even a slight economic downturn could completely wipe them out.

State and local government debt levels are also at record highs, but nobody seems to care.  And if we never have another recession everything might work out okay.

The biggest offender of all, of course, is the United States federal government.  We have been adding about a trillion dollars a year to the national debt since Barack Obama first entered the White House, and Goldman Sachs is projecting that number will surpass 2 trillion dollars by 2028

The fiscal outlook for the United States “is not good,” according to Goldman Sachs, and could pose a threat to the country’s economic security during the next recession.

According to forecasts from the bank’s chief economist, the federal deficit will increase from $825 billion (or 4.1 percent of gross domestic product) to $1.25 trillion (5.5 percent of GDP) by 2021. And by 2028, the bank expects the number to balloon to $2.05 trillion (7 percent of GDP).

Our national debt has been growing at an exponential rate for decades, and because total disaster has not struck yet many people seem to believe that we can keep on doing this.

But the truth is that it simply is not possible.  There is only so much debt that a society can take on before the entire system implodes.

So how close are we to that point?

The following chart comes from Charles Hugh Smith, and it shows the exponential rise in overall debt levels that has taken us to the brink of nearly 70 trillion dollars in debt…

And this next chart from the SRSrocco Report shows how our rate of overall debt growth has compared to our rate of GDP growth…

We are literally on a path to national suicide.

Whether it happens next month, next year or five years from now, it is inevitable that we are going to slam into a brick wall of financial reality.

For the moment, the only way that we can continue to enjoy our current debt-fueled standard of living is to continue increasing our debt bubble at an exponential rate.

But that can only go on for so long, and when the party ends we are going to experience the greatest debt crisis in history.

Today, the average American household is nearly $140,000 in debt, and that is more than double median household income.  And if we were to include each household’s share of corporate debt, local government debt, state government debt and federal government debt, that number would be many times higher.

All of this debt will never be repaid.  Ultimately there will come a day when the system will completely collapse under the weight of so much debt, and most Americans are completely unaware that such a day of reckoning is rapidly approaching.

Comments

PrayingMantis Bobbyrib Mon, 05/28/2018 - 09:49 Permalink

 

   ... @bobby

   ... it might be as simple as that, yes, (no sarc needed :) ... you might gain an insight from many articles on the internet about the bankruptcy and fall of the Soviet Union ... here’s a tidbit from one ...

    ... “ ... In December of 1991, as the world watched in amazement, the Soviet Union disintegrated into fifteen separate countries. ... “ ... >>> http://www.coldwar.org/articles/90s/fall_of_the_soviet_union.asp  ...

   ... now, out of those fifteen separate countries, which country do you think would shoulder the Soviet’s total debt?  ... I don’t think any one of those 15 would be foolish enough to raise their hand and embrace the Soviet Union’s debt  ...

   ... and the total debt was written off ... and it could be just as simple as that ... 

   ...and who knows what would happen if the US files for bankruptcy with a total debt of $70 Trillion and counting (real fast) ... 50 separate countries, perhaps? ... well, who knows .... the crooked-nosed dual citizens might know ...

... ((( they ))) control the swamp ... 

 

In reply to by Bobbyrib

Richard640 cheka Mon, 05/28/2018 - 13:01 Permalink

THIS ARICLE OUGHTA BE GOOD FOR ANOTHER 2000--3000 DOW POINTS

&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

THE ROAD TO PROSPERITY IS PAVED WITH FISCAL PROFLIGACY

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

THE ROAD TO POVERTY IS PAVED WITH FISCAL RECTITUDE

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

BUY ANOTHER 1000-!!!  

In reply to by cheka

Richard640 J S Bach Mon, 05/28/2018 - 13:00 Permalink

THIS ARICLE OUGHTA BE GOOD FOR ANOTHER 2000--3000 DOW POINTS

&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

THE ROAD TO PROSPERITY IS PAVED WITH FISCAL PROFLIGACY

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

THE ROAD TO POVERTY IS PAVED WITH FISCAL RECTITUDE

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

BUY ANOTHER 1000-!!!  

In reply to by J S Bach

Lynn Trainor chrsn Mon, 05/28/2018 - 05:29 Permalink

"No chance of ever paying it back, so just enjoy it while it lasts" - not a chance could I enjoy it when I know that all hell is gonna break loose over our heads at any time and my children will be literally starving, and hard to enjoy while being constantly infuriated watching the treasonous Congress in the face of this looming crisis keep right on blowing my hard earned tax dollars on foolishness such as their proposal to spend $350,000. to study if japanese quail are more sexually promiscuous on cocaine.  Furthermore, I know full well that author's use of the term "national suicide" (irretrievable national ruin) is none too strong.

In reply to by chrsn

Pernicious Gol… Sun, 05/27/2018 - 21:22 Permalink

I've been hearing since the Carter years our profligate borrowing would lead to us living in caves within 5 years. I agree the astronomical debt is bad beyond telling, but I have no idea what is going on.

Jung Sun, 05/27/2018 - 21:28 Permalink

Can somebody explain why the collapse never seems to happen: this story has been told many times, but somehow all just goes on as usual. Why does it not happen? An article on the many predictions of this kind would be good too compared to those who believe it can go on forever as they will just print more money and ultimately they might have to say "stuff you" to the Fed which has 445 trillion in assets, so money plenty! Back to a none-debt economy and bye to the Fed.

indygo55 Jung Sun, 05/27/2018 - 21:53 Permalink

Its a confidence game. As long as the majority of sheep still BELIEVE in the dollar and the conditioned response that they can't do anything about it anyway, the system will continue. The 2008 crisis happened, among other things, when the buck broke and no one (banks) trusted each other. That'll happen when people can't pay their bills with the rapidly depreciating dollar and panic ensues. It'll happen, just the timing is impossible. But this thing is sure looking pretty long in the tooth. Its all about the dollar. That's why Russia, China, Turkey and others are openly talking about getting out of the dollar. 10 years ago that would mean getting bombed back to the stone age, ala Iraq, Libya, and now Syria. The pictures of Syria are outrageous and yet we are still there, against International law. 

In reply to by Jung

Radical Marijuana Jung Sun, 05/27/2018 - 22:07 Permalink

"Can somebody explain why the collapse never seems to happen?"

"Money" created out of nothing as debts is being used to "pay" for strip-mining the natural resources of a still relatively fresh planet. As long as there are enough natural resources left to continue to strip-mine at about exponentially increasing rates, then the currently established political economy can continue to create more "money" out of nothing as debts in order to "pay" for doing that ...

In reply to by Jung

house biscuit HRH of Aquitaine 2.0 Mon, 05/28/2018 - 05:19 Permalink

Stupid question followed by a stupider answer

When the value of equities drops by many % for a number of years, that is a collapse; it is a personal apocalypse for many, many people

The answer about 'strip mining the earth', don't know WTF that's about. Maybe don't take investment advice from a dope entity

The expansion of credit is largely to fuel gambling in the financial markets by major actors who have first access to the debt

 

 

In reply to by HRH of Aquitaine 2.0

k_as_in_cat Jung Sun, 05/27/2018 - 23:00 Permalink

It is well known that the world's super-powers have nuclear weapons but the question remains: would they ever be used in anger? The thinking goes that if one power were to fire a nuclear weapon, they would be obliterated in the ensuing retaliation, a situation known as M.A.D., Mutually Assured Destruction.

Due to the USD being the world's reserve currency, a collapse of the USD would the the financial equivalent of M.A.D. So, the plan for the foreseeable future is for the US' trading partners to continue buying US debt until they can figure out a way to protect themselves from a US default. Everyone knows that, one day, there will be a bond market catastrophe, but no one wants it on their watch.

The fiat currency experiment will end with a US default and it seems to me that a lot of people will not survive the ensuing land-grabs, trade wars and capital controls.

In reply to by Jung

platyops Jung Sun, 05/27/2018 - 23:58 Permalink

The collapse has not happened because there are many smart people that work very hard to keep it going. Eventually and my guess is right after the upcoming elections in November.

Americans the middle to lower strata will not be able to pay their way anymore. Then a domino effect and the nightmare begins. My guess is Dec. 1, 2018 is when the "Big Red Balloon" goes up.

Keep Stacking!

In reply to by Jung

Lynn Trainor Jung Mon, 05/28/2018 - 05:39 Permalink

The collapse never seems to happen, but though long delayed it will happen.  We have been spared the day of reckoning a little longer because we have the world's reserve currency, but that status is rapidly being undone as we speak.  The collapse of Rome took many years also, but its' fate was none the less certain.

In reply to by Jung