US Household Debt Hits Record $13.3 Trillion

Total household debt hit a new record high, rising by $82 billion to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier according to the NY Fed's latest household debt report. It was the 16th consecutive quarter with an increase in household debt, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008.  Overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013.

Mortgage balances—the largest component of household debt—rose by $60 billion during the second quarter, to $9.00 trillion. Credit card debt rose by $14 billion to $829 billion; auto loan debt increased by $9 billion in the quarter to $1.24 trillion and student loan debt hit a record high of $1.41 trillion, an increase of $2 billion in Q2.

Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion. The median credit score of newly originating mortgage borrowers was roughly unchanged, at 760.

Mortgage originations edged up to $437 billion in the second quarter, from $428 billion in the first quarter. Meanwhile, mortgage delinquencies continued to improve, with 1.1% of mortgage balances 90 or more days delinquent in the second quarter, versus 1.2% in the first quarter.

Most newly originated mortgages continued went to borrowers with the highest credit scores, with 58% of new mortgages borrowed by consumers with a 760 credit score or higher.

Outstanding student loan debt was mostly unchanged in the second quarter and stood at a record $1.41 trillion as of June 30. Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $9 billion in the quarter, to $1.24 trillion. Meanwhile, credit card balances rose by $14 billion, or 1.7%, after a seasonal decline in the first quarter, to $829 billion.

Despite rising interest rates, credit card delinquency rates eased slightly, with 7.9% of balances 90 or more days delinquent as of June 30, versus 8.0% at March 31. The share of consumers with an account in collections fell 23.4% between the third quarter of 2017 and the second quarter of 2018, from 12.3% to 9.4%, due to changes in reporting requirements of collections agencies.

Meanwhile student loan delinquencies remain stubbornly just above 10%, a level they hit 6 years ago and have failed to move in either direction.

In some good news for the student loan debt seriously delinquent student loans, those 90 days or more behind, declined in the second quarter to 8.6% from 8.9% in the prior quarter.

"Aggregate household debt grew for the 16th consecutive quarter in the second quarter of 2018," said Wilbert van der Klaauw, New York Fed senior vice president.

"While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans."

Fonte: qui

The Absurd U.S. Economic Model: $300 Billion In New Debt Just This Week

“The entire US national debt was around $300 billion when John F. Kennedy was President…” Here’s why it matters…

by Simon Black of Sovereign Man

I’m doing my best to take a few days off this week, and have the pleasure of spending time with some friends here in a fairly remote corner of Vietnam’s magnificent coastline.

This is one of the most pristine places I’ve ever been– a high-end resort nestled at the top of a mountain in the middle of nowhere overlooking Vietnam’s postcard-perfect Vinh Hy Bay.

I’ve traveled extensively through Vietnam over the years, from Hanoi in the north, to Saigon in the south, and all along the coast. And the country has always impressed me with its raw beauty.

But what’s always been even more impressive to me is how productive and industrious Vietnam has become.

Remember, this place is supposed to be Communist. And like all Communist experiments, this one nearly ended in economic catastrophe. Vietnam was among the poorest countries in the world just 30 years ago.

But in 1986, on the brink of economic meltdown, the government launched a series of sweeping economic reforms they called ‘doi moi’.

Suddenly it became possible for private individuals to start their own businesses, invest capital, and keep what they earned.

The economy started to boom practically overnight, and it’s been growing consistently at 6% to 8% annually for more than three decades.

The primary driver of the Vietnamese economy, of course, is production. Manufacturing. Exports. Etc.

In fact Vietnam is now a dominant manufacturer across dozens of industries and stands to gain if there’s a protracted trade war between the United States and China.

What’s also interesting about Vietnam is that the savings rate is one of the highest in the world– Vietnamese save an overwhelming percentage of their incomes to invest in the future.

So in other words, Vietnam’s economic model is based on saving and production.

This stands in stark contrast to the Western economic model which is based on debt and consumption.

In the United States (and much of Europe), for example, consumer spending comprises roughly 70% of all economic activity.

So consumption, not production, is the single largest component of GDP.

No one ever talks about American producers or entrepreneurs driving economic growth. It’s all about the consumer.

And savings rates in the West are appallingly low… sometimes even negative.

People go into debt to spend money they don’t have to buy things they don’t need to impress people they don’t like.

It’s totally absurd. Yet this is the primary economic growth model for most Western nations.

Consumption, of course, extends far beyond individuals.

Just look at government spending as an example.

The US government’s total debt level now exceeds $21 trillion. And just this week alone, the US government is issuing $300 BILLION in new debt.

To put that number in perspective, the entire US national debt was around $300 billion when John F. Kennedy was President of the United States.

Now they’re issuing that much debt in a single week.

Where does it all go?

The government spends trillions of dollars each year… and a lot of it gets wasted on some of the most comical misuses imaginable.

The National Institutes of Health, for example, spent $1,552,145 of your money to develop a video game that teaches parents how to feed their kids vegetables.

Then there was the $544,338 that the Justice Department spent to spruce up its LinkedIn profile.

And those are just two very tiny examples.

There are also really big, egregious examples, like that $2 billion Obamacare website fiasco.

Or the $1 billion that the Defense Department spent to destroy $16 billion of perfectly good ammunition.

This is all useless, wanton consumption. And it doesn’t take a rocket scientist to figure out the long-term consequences.

Countries whose economic models are based on savings and production will prosper.

Countries whose economic models are based on debt and consumption will suffer.

28 03 2018