U.S. Households Owe $12.7 Trillion. That's Good, and Bad

Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.

The growing debt level shows that many of the millions of Americans who struggled during the recession have sufficiently repaired their credit to qualify for loans. Italso speaks to growing optimism among banks and other lenders about economic growth.

Debt can fuel consumer spending, which accounts for nearly 70 percent of all economic activity in the United States.

Yet the borrowing peak also signals potential new risks to the economy.

One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.

The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago.

“This is not a marker we should be superexcited to get back to,” said Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth, a liberal think tank. “In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don’t support.”

Student loan debt, driven by soaring tuition costs, now makes up 11 percent of total household debt, up from 5 percent in the third quarter of 2008.

By comparison, mortgage debt is 68 percent of total debt, down from 73 percent during the same time period.


That’s a service based economy that people keep bragging about. It only grows if you add more debt.

I think it is fine, not bad. During 2007-2009, US lost 14T assets

By one Federal Reserve estimate, the country lost almost an entire year’s worth of economic activity – nearly $14 trillion – during the recession from 2007 to 2009.

My wife’s niece, graduated 2 years ago. She and her father paid that loan recently. A pain in the bucket. It really drags the dreams of youngsters.

The funny part is that 2 weeks ago, no kidding, she embarked herself in buying a $55K car, financed.

Some people never learn. :scream:

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Are they immigrants? Can’t get soft on the kids… make them appreciate what they have!

Most of us, except for some people I know of, are immigrants.

I believe youngster nowadays are embedded, stuck in looking handsome but living pinching pennies from the month to month paycheck. It may be a bad statement, but that’s how I see it.

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yes buyinghouse, you’re absolutely correct, i hire a young junior contractor like 2 months ago, and last week he so excited that he bought something want to show us. Guess what, it’s a $100 starwar saber.
and that thing to me looks like it’s worth 10 bucks… And he keep talking about want to buy a house in vegas(orignally from) but he just took a trip to japan that’s just cost him 1/8 of a downpayment. I don’t know what these youngster are thinking really.

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I think, I hope I don’t discriminate, but the entrepreneur mentality of some cultures makes a difference. I have read and heard a lot about it on this forum. I come from a culture that in most of the cases, the individuals like me, when came to this country, were looking for the paycheck. I blame that on the real fact that we didn’t have a fathering figure to copy from. Work, work hard with our backs and hands, not with our brains.

Perhaps the new generation, no matter if Asian or whatnot, is not listening to what the old farts like you and I are telling them about becoming financially successful before engaging in living like kings. It’s all the way around here, they live like kings, while earning like peasants.

Now, I have a son, 13 years old, and I tell him a lot about what I say here, I say “don’t be like some people I know”. They have lived like peasants eating ramen all their lives, but are rich as kings. But it seems that they never learn when to start living. You can’t carry with you the tons of money you made when you kick the can. You can’t, try, you will fail. :stuck_out_tongue_winking_eye:

Have a nice weekend.