Will Credit Card Debt Crush American Households? The chart of American credit card debt is not pretty.
However, we disagree with negative tone of many market pundits on the increasing amount of American credit card debt. In our view, increasing credit debt level is not as worrisome as long as the total household debt as % of total net-worth of US households is still small and manageable. It appears to be the case as of end of 2008:
- US Household assets as a whole: $65.7 trillion, unadjusted for inflation.
- US Household liabilities: $14.2 trillion.
- Net worth of US/American households (assets minus liability) was $51.5 trillion.
(Source: The Federal Reserve)
This means the total household liabilities (not just the credit card debt) as % of total net-worth of US households is still 27.5%...very reasonable still.
Hence, we argue that US households in general on aggregate are still able to absorb and withstand higher debt levels. This is a surprising fact but fortunately true.
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Let me take away your job and raise the rates on your credit cards along with lowering the limits and then lets see if you can say the household debt of America is manageable. Oh yea, lets raise gasoline to $3.00 per gallon and increase food and energy prices by 20% also.
ReplyDeleteWell it seems to me that we in Malaysia are suffering from high inflation and boom in our economy, we have to import in foreign labour for undesirable jobs that none of our citizens wants to work at. China, Indonesia and Singapore are also booming, an example would be a dessert I bought a month ago was $ 1.20 in local currency and currently is selling at $ 1.80 which shows high inflation... The job market is also good with 2 jobs available for 1 worker, leading to high wage growth, hence we have to import in labour. We found out after March 2009 that we were not going to go into a Recession, imagine our surprise when we were told we were going to go into a Recession, we suspect we were saved by China's boom and growth ! There is plenty of money available nowadays, it is just that Americans are too lazy to work hard for it, there is money everywhere nowadays. You should post articles on how to job hop to higher salary and how to spend all the extra money on luxury items or even how to fight inflation !
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