State of the American Wallet: What's in Store for 2018?

As of June 2017, Americans had a record $1 trillion in revolving debt. Nonrevolving debt is growing even faster.

MarketWatch has "One Sure-Fire Prediction for 2018 " Americans will take on even more debt.

The average credit-card balance per consumer will rise about 1% next year, according to TransUnion. This would be the fifth year in a row that the debt level would increase. Today, households that have credit-card debt each have about $15,654, according to NerdWallet, so their balances could rise about $156 next year.

The rise in debt is partially because of consumers making unnecessary purchases, Palmer said; some 41% of the 2,000 consumers NerdWallet surveyed in November said they spend more than they can afford on items they don’t need.

But there are other factors at play. Expenses like food and housing are “skyrocketing” faster than income, she said. That leaves little money for other essentials and emergency funds for expenses like medical bills.

“It’s really striking how much credit-card debt is weighing on American households,” said Kimberly Palmer, a credit-card expert at the personal finance company NerdWallet.


I produced the top chart from the latest Fed G.19 Report on Consumer Credit.

The trend is unmistakable, but more so for nonrevolving credit than credit card debt.

Sure-Fire Prediction?

  • The total consumer credit recession peak was $2.664 trillion in July of 2008.
  • In August of 2010, total consumer credit fell to $2.518 trillion.
  • Revolving credit fell from $1.021 trillion in April of 2008 to a low of $0.833 trillion in April of 2011, a three-year decline.

It is by no means a "sure-fire" prediction that credit will expand in 2018.

Writeoffs on consumer credit are poised to soar once a recession hits. Consumers will once again attempt to pay down credit card debt.

Explaining the Credit Binge

The availability of credit exploded after Nixon closed the gold window on August 15, 1971.

At that point, nations no longer had to spend their gold or hike interest rates to stop the flow of gold on trade deficit balances.

Balance of Trade

Sorry State of Affairs

After Nixon closed the gold window, consumers could borrow all they wanted to buy junk from China and cars from Japan.

And with China and Japan accumulating US assets in return, there was a guaranteed buyer of US treasuries at increasingly lower interest rates.

GDP is in a funk because of debt overhang. Consumers struggle to pay down debt. Many can't because they are overleveraged to their homes.

This is all very inflationary until the bubble bursts once again. And when it does, faith in central banks will take a big hit. I expect gold will be the beneficiary.

When Does Gold Do Well?

Gold is not really an inflation hedge per se. Gold fell from $850 in 1980 to $250 in 2000 with inflation every step of the way.

Rather, gold performs well in specific instances, the primary one being a loss of faith that central banks have things under control.

Do central banks have everything under control? The charts suggest otherwise.

For further discussion, please see How Much Gold Should the Common Man Own?

Mike "Mish" Shedlock

Comments (10)
No. 1-10

Mish, at least on revolving debt, we pay off our cards every month, but definitely put more on cards than years ago, simply because some offer great incentives, like 6% back on groceries for an AmEx card. Not trying to say the numbers are wrong, but are they being skewed by adding in credit that I use and pay off monthly as well?


While no doubt some of this credit binge is for unnecessary expenses, more of the debt now is due to families being heavily squeezed by high housing, food, and medical insurance costs. In the last recession, it was easy for consumers to cut back and not buy the latest iPhone or that big new flat screen TV, but this time it will be much harder. I don't even want to talk about student loan debt.


Revolving debt hasn't changed much from ten years ago, but what is in in the non-revolving debt that has exploded so rapidly? Mortgages, student loans, and car loans are three obvious things. Perhaps medical debt on payment plans is another? Which parts of these are growing the fastest?

Mike Mish Shedlock
Mike Mish Shedlock


Corto, I do not know how much is skewed by that stat. I too, chare everything I can. I get free miles. For those who do carry balances, the amount is soaring.


You want to adjust that chart for inflation or income? Otherwise it just looks a lot like this chart of nominal median income: