Are People in Financial Trouble?
You hear the words low unemployment coupled with an economy that is booming. The stock market has gone crazy. Unemployment (According to politicians) is at lows not seen for decades.
Then there are these two reports:
LendingTree released its monthly Consumer Debt Outlook report, their analysis of the latest Federal Reserve data. This month's report found that revolving debt, almost all of which is credit card debt, increased by more than $16 billion in May, the largest-ever increase in revolving credit for that calendar month and the largest percentage increase since 1995.
Then there is this release from the Associated Press:
WASHINGTON (AP) — U.S consumers increased their spending just 0.2 percent in May, a disappointing result after two months of much stronger gains.
So, let me get this right - Consumers racked up consumer credit through credit cards at the fastest pace since 1995. The economy is supposedly booming. Consumer spending drives 2/3rds of economic growth. Consumer spending was rather disappointing in May.
It begs the question - what are consumers using credit for? It certainly isn't for spending. Is the consumer having to resort to credit cards as a means of paying the bills? It doesn't make sense when you look at the numbers.
What's worst is the consumer is racking up credit card debt with some of the highest interest rate averages in years. I don't have data that says how much of that increase gets paid off. Yet, there probably is a good percentage of debt that consumers are willing to hold at very high interest rate averages. Credit card companies are willing to loan money. This looks a lot like the same conditions before the debt crisis hit.
I have said all along that I don't think that things are as good as advertised. The numbers just don't add up. Meanwhile, real estate sales in Southern California fell a dramatic 11% this last month as prices hit record highs. California is a leading indicator of where the real estate markets are heading across the nation. We are in much more debt than ever imaginable - much bigger than before the financial crisis. Is the damn about to break?