Daily Management Review

Americans owe $ 12.3 trillion


08/11/2016


In the second quarter of the year, debt of the US population increased by $ 35 billion to $ 12.3 trillion. Such a growth was triggered by Fed’s low interest rate, and entailed increased volume of car loans, an increase in credit card debt. Volume of educational and mortgage loans fell slightly.



Federal Reserve Bank of New York has published data on dynamics of the US population’s debt of. Compared with the first quarter, the total debt grew by $ 35 billion (0.3%), and reached $ 12.29 trillion. Compared with the second quarter last year, the increase was $ 434 billion. Federal Reserve Bank of New York noted that growth was due to jump in total volume of car loans by $ 32 billion, to $ 1.1 trillion, and debt on credit cards - by $ 17 billion to $ 729 billion. Volume of mortgage debt in the second quarter decreased by $ 7 billion, to $ 8.8 trillion, after rising by $ 120 billion in the first quarter. Amount of educational loans decreased slightly - by $ 2 billion to $ 1.26 trillion. Regulators say that the second quarter has improved the situation with bad loans. In addition, volume of seizures of property for non-payment of loans reached a new historical minimum in the last 18 years of observations. 

American observers have noted that credit growth indicates availability of credit and consumer confidence in the state of the economy. From 2008 to 2013, when the US economy has gone through a severe financial crisis, and then a long period of recovery, the total amount of public debt fell to $ 1.5 trillion. The first signs of recovery of the credit market and consumer confidence was growth of educational and auto loans. This was followed by rise in mortgages, and debt and credit cards. 

The Wall Street Journal, citing data from the US Federal Reserve, says debt on credit cards in the US could reach $ 1 trillion in 2016. Thus, the amount of debt will approach pre-crisis levels - record high $ 1.02 trillion was reached in July 2008. Level of private savings of Americans then accounted for 4.4%. By December 2012, it rose to 11%, and now fell to 5.4% once again. In the first quarter of this year, credit card debt was $ 951.6 billion, which is 6% more than in the same period of 2015, and is the highest since August 2009.

These figures suggest that consumers are moving away from the crisis-induced austerity. According to experts, this is due to sustainable economic development and improvement of the situation on the labor market, which had a positive effect on consumer sentiment. On the other hand, the situation highlights aggressive policy of banks at low interest rates - they give more cards to increase credit limits and offer customers discounts and additional services. Banks are increasingly offering high risks loans to borrowers, who are not enough reliable and solvent. According to Equifax credit bureaus, high-risk borrowers issued 10.6 million credit cards in 2015, which is 25% higher than a year earlier. This is the highest figure since 2007. 

source: wsj.com






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