This past week, the Federal Reserve released their most recent report on consumer debt. It did not paint a pretty picture. Overall consumer debt increased by a sobering $10.3 billion for March. This brought it up to an all time high of over $4 trillion ($4.05 trillion to be exact). The chart below shows the year long trend in consumer debt:
This means that through the conclusion of the first quarter in 2019, the total American consumer indebtedness rose at a yearly rate of 4.25 percent. Yet March’s increase was a mere 3.1 percent. This March total actually came in as the tiniest increase in consumer debt in nine months.
Now these totals of consumer debt encompass student loans, credit card debt, and car loans. They do not consider mortgage debts. Regardless of this, the consumer debts only keep rising and setting new records each month.
Yet another worrying revelation for March was that this borrowing pace slowed down for the month. It represents a significant potential red flag warning on the American economy.
Consider that the category of revolving credit (mostly credit card debts) declined 2.5 percent by $2.18 billion in March. This was on the heels of a 3.5 percent gain for February. Yet it represented the second such drop in the credit card borrowing category in the past four months.
The category of non-revolving credit (student loans and car loans) carried the total record debt to a new high as it increased by $12.5 billion. American student loan debt has now risen to almost $3 trillion, a scary figure that will represent a drag on the economy and haunt consumers for decades to come.
Some people might be inclined to believe that a slowing consumer borrowing represents a positive thing as the debt burden Americans are carrying is so astronomical. This should be the case, but is not for an economy erected entirely on borrowing. 24/7 Wall Street refers to this as a proverbial two edged sword, with:
“The more borrowings are outstanding means the more burdened the consumer is with debt. Then again, if they aren’t buying on credit then they it is also assumed they are buying less in general… Close to 70 percent of GDP is tied back to consumer spending — and it is hard to feel great about this trend considering that the Commerce Department’s first estimate for first quarter GDP was unexpectedly above three percent and considering that unemployment is at the lowest level in 50 years.”
Consider yourself fairly warned; the economy is not in such great shape as the government wants you to believe.
Is Your Retirement Portfolio Protected from the Record American Consumer Debt Fallout?
The Federal Reserve is undoubtedly being influenced by this tug of war in American consumer debt going on. Their present stance may be patient without Powell presently foreseeing either rate hikes or cuts in the immediate future, but he may have no choice but to force rates lower to keep people borrowing before long. Raising rates will also be necessary again at some point, but doing so will destroy the finances of a federal government paying interest on over $21 trillion in debt and the consumers saddled with more than $4 trillion in debt.
Lower rates would mean easier money and more bubbles to explode, taking down the stock markets again and causing inflation to rise. Higher ones will similarly tank markets as investors trip over each other in their panic efforts to get to the exits. Where can you find a safe haven to protect your retirement portfolio from either scenario? Gold delivers an incomparable track record and offers reliable protection in both cases. No other safe haven asset can hope to match it. Gold has insured people’s precious assets for thousands of years, allowing them to sleep secure in the knowledge that their currency was safeguarded by the reliable yellow metal.
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