How bad will this get???
Consumers are supporting $7 Trillion more in debt than a few years ago.
Wages are flat and in many cases declining.
Food and Fuel prices are skyrocketing.
Banks are cutting off access to credit.
The equation is simple:
For those that live paycheck to paycheck, have little in savings, just dropping a little bit below your minimum payment threshold causes defaults. You don't have to lose your job, simply stagnant wages and rising expenses can cause defaults. Job losses only accellerates the losses.
My friend and I were debating what percentage of Americans face this condition. I estimated about 50% and he estimated closer to 2/3 to 3/4. What is interesting, absent the top 5% of wage earners, incomes for Americans have actually declined in the past 7 years. Never has Americans experienced a decline in wages for such a long period before.....then add in inflation and the relative decline is enormous. In the seventies, wages went up with inflation.
So here is the problem, if 2/3 of the country is not earning enough to subsist and service debt, what kind of defaults can we expect. Our country services over $50 trillion dollars of debt. Further, the spillover is going to be enormous as business fail do to slowing sales and municipalities can't generate enough in taxes to provide services and pay debt obligations.
In The Great Depresssion, the debt burden on the average American relatively was much lower than it is today. Yes, we can argue we consume too much, but that consumption is what drives business, wages and government taxes.
The downward spiral from tightening credit and slowing spending seems seems like it has a long long way to go. The question now is how long?