- U.S. household debt sets a new record…
- Debt is like a martini…
- The #1 stock to buy before the huge SpaceX IPO. Get the free ticker here.
Dear reader,
I am informed that United States household debt leapt $18 billion in the year’s first quarter.
United States household debt presently levitates at a record $18.8 trillion.
Debt — in itself — is not necessarily the scarlet sin of profligacy and wastreldom.
A man may plunge himself into debt to expand his business in anticipation of fat times ahead.
His debt may thus be considered productive debt.
Yet the galactic household debt under consideration does not sort into this category.
Mortgage debt and automobile debt constitute the bulking majority of United States household debt.
Credit card debt, meantime, registers the second-highest level on record.
Credit Exhaustion
A recent WalletHub’s Credit Card Debt Survey revealed that:
43% of respondents claim they are still servicing credit card debt from last fall.
33% expect to take on additional credit card debt by year’s end.
Some 40% of Americans claim they have attained credit exhaustion — they can shoulder no more debt.
37% are more fearful of lifetime debt bondage than of artificial intelligence seizing their jobs.
Your humble correspondent entertains a theory:
We Americans are frogs. We are frogs wallowing blissfully in a pot of incrementally warming water.
Slow Death by Debt
We boil gradually away, unaware… comfortable… arrogant… and ignorant.
That is, we the American people have grown so accustomed to the warmth enwombing us — and for so long — we are incapable of detecting the ratcheting heat.
We will never jump the pot. We are simply too comfortable inside it.
And debt is the agent of heat creation. Debt is gradually yet inexorably cooking us.
Debt was once a cultural taboo — a scarlet “D” emblazoned upon the bosom.
Credit for households was virtually unknown. And only the poorest households resorted to debt-financed consumption.
Yet today galloping household debt is a commonplace.
Mr. Lance Roberts of Real Investment Advice:
“Debt is no longer just a tool for convenience; it’s a necessity for millions’ survival.”
Is this the indication of a healthy economic order?
I do not believe that it is the indication of a healthy economic order.
A Dreadful Addiction
Debt — nonproductive debt, that is — is a dreadful addiction.
It steals from the future to satisfy today.
It brings tomorrow’s consumption forward to today, that is to say… and leaves the future empty.
Economics commentator Charles Hugh Smith:
- Debt has one primary dynamic: Borrowing money to consume something in the present brings forward consumption and income…
- If we choose to consume now, we have less income to save for future consumption or investments. If we sacrifice consumption today, we have more money in the future for consumption or investing…
- Those who brought their consumption forward can no longer add to present consumption, as their future income is already spoken for.
Debt Is Like a Martini
I have, in fact, previously compared debt to the martini.
“One martini is alright,” counseled the late scribbler James Thurber.
“Two is too many,” he continued… “and three is not enough.”
As with the martini, so with debt.
One round of debt may be alright. Two is too many. And three is not enough.
The initial dose brightens a man’s spirits, unties his tongue, lubricates the social machinery.
The imbiber yields rapidly to debt’s liquidy charms… as he yields to the martini’s liquidy charms..
And so he orders a second round of debt.
The first round — after all — set things swinging.
He concludes the second round must therefore dazzle.
Two Is Too Many
Yet this second dose of debt dizzies the senses… and fogs the judgment.
It is one round too many. A cardinal fact soon emerges:
This business is unsustainable in the absence of additional debt. He requires an additional round.
Thus the barman is instructed to mix the third libation.
Yes, it keeps the night going. Yet this dose lacks the stimulating effects of the second dose, much less the first dose.
That is, the third dose is not enough.
Only a fourth round of debt — an even stiffer round — can work the intoxicating effect.
Down the gullet it goes. It too proves inadequate to needs.
Thus a fifth, stiffer round is required to sustain the previous four.
And so a fifth, stiffer round it is.
By now the poor fellow is 100% out of his wits, all senses deranged.
Yet he demands more.
Get Out of Here!
Eventually the barman will serve him no longer. He is handed a bar tab — and what a bar tab!
The spendthrift’s credit card is declined.
The human gorilla manning the door proceeds to haul him outdoors… and heave him upon the pavement.
He is a man undone.
One debt martini was alright. Two was too many.
Alas, three was not enough.
Neither would the eighth be enough, the 33rd or the 57th.
That is because debt engenders an infinite thirst.
Alas, for millions of Americans wallowing beneath record debt… I hazard the ultimate aftereffect will be a migraine for the ages.
Regards,
Brian Maher
for Freedom Financial News
