Guest Post by Peter Schiff
Could the house of credit cards Americans have built be on the verge of collapse?
Earlier this week, the New York Fed released the latest data on US household debt, revealing it has grown to a record $13 trillion. Americans have been spending, but they’ve been putting a lot of it on plastic. Credit card balances grew by $24 billion in the last quarter of 2017 alone. Meanwhile, US consumers owe $1.22 trillion on vehicle loans. This can only go on for so long. And their are indications that the American credit card spending spree may be winding down.
Retail sales unexpectedly fell in January, recording their biggest drop in nearly a year.
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According to Commerce Department data released Wednesday, retail sales dropped 0.3% last month. Analysts had expected 0.2% increase. On top of that, the Commerce Department revised December retail sales downward to “unchanged” from the previously reported 0.4% increase.
Analysts say falling auto and building material sales drove the overall decline. Auto sales dipped 1.3% last month after slipping 0.1% in December. Building material sales saw the sharpest drop since April 2016, falling 2.4%.
So called “core retail sales” excluding autos, gasoline and building materials were unchanged last month after a downwardly revised 0.2% drop in December. According to a Reuters report, core retail sales correspond most closely with the consumer spending component of GNP.
Last month’s unchanged core retail sales reading pointed to a slowdown in consumer spending at the start of the year. The downward revision to December’s data suggested that the government could lower its fourth-quarter estimate for consumer spending.”
Consumer spending accounts for more that 2/3 of US economic activity.
There’s been a lot of talk about an improving economy over the last several months. Pundits and talking heads have pointed to relatively healthy economic growth. But could it be that this is all just a house of credit cards? And could that debt pyramid be in danger of collapsing?
Buying on credit is nice until the bills start coming due. And at some point, those bills always come due.
When an economy is growing based on credit, it creates the false illusion of prosperity. Products fly off the shelves, but it doesn’t represent real economic growth. It all has to be paid for in the future. That means consumers will have less disposable income down the road when it comes time to pay off those bills. When people buy on credit, they simply push future spending into the present. You can’t do that indefinitely.
There is another issue here nobody seems to be talking about – rising interest rates. Americans have a $834 billion credit card tab. Every time the interest rate goes up, minimum payments go up on those credit card bills. It takes longer to pay off the balances. And ultimately, it costs consumers more. That means consumers will have less available cash to spend in the future. Retail sales will fall.
This combination of high levels of debt and dropping retail sales should send up a big warning sign. It’s too early to know for sure, but it could be a sign that Americans are maxed out. They’ve hit those credit card limits and spending is slowing down. That doesn’t bode well for future economic growth. And if the debt bubble bursts, we’ll have a real mess on our hands.
But most mainstream pundits won’t bother to put 2 and 2 together. They rarely step back and look at overall dynamics. They report the numbers and then move on. As Peter Schiff said, the “fake financial news” is pretty clueless. But the rising debt levels and falling retail sales are two more signals that we may well be headed for some pretty turbulent waters.
At some point, the immovable object of limited means meets the irresistible force of inflation?
Real simple. The masses have been using credit card debt to fill the gaps between stagnant incomes and an ever-increasing cost of living (the savings rate in this country is and has been a joke for at least thirty years). Another startling reality is that the fastest growing age segment declaring bankruptcy are those over 65 running up credit card debt to pay medical costs. The entire economy is predicated on ever-increasing growth driven by ever-increasing debt. And Schiff is right: when, not if, but when interest rates adjust to reflect the real cost of borrowing (the inherent risk-reward of a free market system), those owing are in for a rude awakening. The only unknown is whether the Fed bails out the Too-Big-to-Jail-Banks next go round?
I am so fucking tired of hearing about this home delivery bullshit.
So Amazon (thru Whole Paycheck) will deliver your groceries in 2 hrs. Here in Minneapolis, Target is now going to start home delivery. I see this concept going to shit. Besides who fuck is home during the day? The dog?
Besides, it would require 100 times the number of Domino’s and Jimmy John’s delivery boys. Maybe a 2 year degree in ‘delivery boy, butt monkey etiquette”. This would be a good major at the Clown Colleges.
How long do you think someone would last on this job?
Drones.
Imagine when the drones fly over the hood? Bang, bang.
The reason they’re pushing home delivery is because they know no one is going to be able to afford a car after the next recession.
“Besides who fuck is home during the day? The dog?”
The employment participation rate for 18-64 years old reportedly is only about 62%. That means, there ARE plenty of poeple who are home unless they are shopping with borrowed money.
Only people are not home who can afford to buy. They are working during regular delivery time.
This whole shit pot of credit buying made-in-China shit is about to come to a real nasty end.
Since about 1958, starting with steel and Singer sewing machines, our industrial jobs starting getting sent over seas and now it is complete. Once upon a time, people who could work their entire life at a job producing value added products used to buy these products with cash money. They prospered, industry prospered, and so did the thousands of the mom and pop stores who payed cash money for what they retailed and serviced.
Henry Ford knew that if people who built his cars didn’t have any money, then he couldn’t sell his cars!
Now, people who work low skill jobs have no money and they use credit cards to fend off the inevitable. The corporate giants who used their scale of operations to drive down their product costs and their ability to get good credit deals squeezed out mom and pop stores, then destroyed the American industries by out sourcing to China. Now, these giant retailers are unable to pay their debts
because no one can afford to buy their Chinese junk.
Folks you had better learn a trade that you can pursue at home or in your garage where you can make or service things, because when this meltdown occurs, you won’t be able to get anything done unless someone in your town or county can do it. There will be no more new big box shit available!
Ah, did your fake cosplay God-Emperor Resident Gump let you down? Told you so. Why anyone expected this clown to “solve” anything is a mystery to me. Ross the Boss had potential. He had a plan. But I couldn’t even get my friends and family to vote for him. Too much prosperity and people just do not PAY ATTENTION. Nobody is sad when somebody you don’t know gets screwed over. All those bozos in Silicon Valley were laughing when “blue collar” workers got fired and dispossessed by the downward spiral of The Toilet Bowl of Shitholistan. They ain’t laughing now. Cause they are H1-b to Bankruptcy.
These invaders do not care. That’s the point. Even a lying little cocksucker thinks twice before turning his homeland into a Shithole. But Alien Hate White America wants to Burn It Down. He believes he can just walk home after killing Whitey. Why do they hate Whitey, Beaver? Its not slavery or colonialism. They are trash and CANNOT BUILD THAT. They want to burn it down. They cannot maintain it or even understand it. They just know Whitey built it and not THEM.
Those tax cuts did bupkus. There is TOO MUCH DEBT for that drop in the bucket to even make a blip. No surprise there. Trillions of “Quantiative Easing” dumping monopoly money into this dead economy and Nut ‘n Honey.
when shit hit fan… close mouth
Hmm….could it be that folks are finally waking up to the fact that “Stuff” doesn’t bring happiness ?
Maybe they no longer worship at the “Kingdom Of Thingdom ” ?