Household Debt Soars to Record $15.58 Trillion in the Fourth Quarter

Household debt chart from Federal Reserve Bank of New York (FRBNY)

The FRBNY Household Debt Report shows new record debt levels in the fourth-quarter of 2021.   

Household Debt Details 

  • Mortgage balances shown on consumer credit reports increased by $258 billion during the fourth quarter of 2021 and stood at $10.93 trillion at the end of December. 
  • Balances on home equity lines of credit (HELOC) were up very slightly, bucking a declining trend in place since 2016Q4, and keeping the outstanding balance at $318 billion. 
  • Credit card balances increased by $52 billion, the largest quarterly increase observed in the 22 year history of the data. 
  • Despite the substantial increase, credit card balances are $71 billion lower than at the end of 2019. 
  • Auto loan balances increased by $15 billion in the fourth quarter, a change similar to that seen in the fourth quarter in the previous two years.
  • Student loan balances contracted by $8 billion in the fourth quarter of 2021, and marked a $21 billion increase since 2020Q4 –the smallest annual increase seen in nearly two decades. 
  • In total, non-housing balances grew by $74 billion, boosted additionally by a $15 billion increase in other balances.

Total Debt Balance 

Total debt chart from FRBNY with data from Equifax

Total Debt Balance by Delinquency Status

Delinquency status chart from FRBNY with data from Equifax, arrows by Mish

Delinquencies decline over time until they suddenly surge in recession.

It’s Time to Discuss Recession

Most do not see the looming recession. I do.

On January 28, I commented With Nearly Everyone Looking the Other Way, It’s Time to Discuss Recession

The economy is not soaring as widely believed. Details show weakness and there are six strong reasons to believe that weakness will accelerate.

I later revised 6 strong reasons to eight.

What Can Go Wrong?

  1. The Fed is hiking
  2. Stimulus has worn out
  3. The stock market is stumbling
  4. Pending Homes Sales Unexpectedly Decline 3.8 Percent in December
  5. Merchants are stockpiling and pre-ordering everything
  6. Retail sales are falling
  7. Major deceleration in deficit spending.
  8. Declining working age of the population will reduce productivity.

I now expect a recession no later than the end of 2023.

Q: I have been asked if I mean the end of 2022. 
A: Actually, I tend to be early, so I gave myself some purposeful leeway.

A 2022 recession is certainly not out of the question nor would it be a bit surprising.

Rising interest rates are already sapping the economy and the Fed has not even begun to reduce QE liquidity as it expects to do. 

The current headwinds are powerful just as government “helicopter drop” stimulus is rapidly waning.

US National Debt Tops $30 Trillion

Finally, please recall US National Debt Tops $30 Trillion

Treasury Secretary Janet Yellen says that’s not a problem. I make a strong case otherwise.

This post originally appeared in MishTalk.Com.

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dmartin
dmartin
2 years ago
Wake me up about this when we actually get an inversion of the 2 and 10 year. 
KidHorn
KidHorn
2 years ago
Right now, I don’t see alarm in the debt charts. But if interest rates really do go up a few pct, that could change quickly. I doubt it would happen.
Call_Me
Call_Me
2 years ago
If one were to consider the declining purchasing power of a dollar over the past 14 years then the nominal ‘record high’ would be gone and the U.S. would be somewhere below the peak of 2008.  It is left to the reader to take this as good or bad news.
This gives one a rough idea of how the value of a dollar has evolved over time-
Call_Me_Al
amigator
amigator
2 years ago
Good stuff as usual!
I am not sure you will see a spike in delinquencies like before  there are many cash purchases these days I think they are getting houses that might usually go to the delinquenters….
Worth some research?
Robbyrob
Robbyrob
2 years ago
New Report: Monetary Policy Without Interest Rate Hikes
TheWindowCleaner
TheWindowCleaner
2 years ago
Debt deflation. It’s inevitable in a money system paradigm of Debt Only…like we’ve had for the entire course of human civilization. You said a long time ago Mish that you learned alot from Steve Keen. His “modern debt jubilee” aligns perfectly with the new monetary paradigm I advocate and is one of the policies in that program in my book. Every empire before Rome had periodic debt jubilees in order to reset their economies and maintain the social contract. We need to be even smarter than they were by integrating price deflation and debt jubilee continuously into the economic/productive process with two other policies that are the very expression of the new monetary paradigm…and thenwe’ll be able to implement the austrian/libertarian wet dream of debt control and beneficial price and asset deflation…without all of the pain and suffering they tend to blithely overlook by trying to do it within the present paradigm.
Christoball
Christoball
2 years ago
I think the modern day Jubilee is called recession and bankruptcy. It pretty much does the same thing monetarily as a group or society, in that it clears the deck.  We have this as an option because there are no longer debtors prisons like in times past. This solution impacts mostly over priced markets, over leveraged Individuals as well as Zombie corporations getting squeezed and their net worth values plummeting. Things just get marked to market rather than marked to pipe dreams. This may seem harsh; but the values were never there to begin with; so truthfully they only loose the down payment and small principal gains made through monthly payments. Not too different from a renter loosing his deposit to an unscrupulous landlord and the high monthly rent. The silver lining is that many people get new beginnings and entry into markets that they could not afford before.
kiers
kiers
2 years ago
15 Trillion debt is the same as 15 trillion in “annual consumption” in GDP!
Christoball
Christoball
2 years ago
Reply to  kiers
kiers is correct
Household consumption is about 60 percent of GDP making it the largest component of GDP besides investment, government
spending and net exports. There are, however, large differences across
countries that can range from about 45 percent of GDP to over 80 percent
of GDP.
All money is borrowed into existence.
Tony Bennett
Tony Bennett
2 years ago
“Delinquencies decline over time until they suddenly surge in recession.”
Yes.  
What kept them low past 2 years were the varied forbearance / moratorium plans.  Only in recent months have programs been phasing out and people have to restart servicing debt.  STILL > 700K on mortgage forbearance (12/31/21).
And goes with out saying POTUS kicked deferment of student loans till May 1, 2022.
Eddie_T
Eddie_T
2 years ago
In the real world there is a COVID economic overhand that corporations don’t have to worry about. Omicron has hurt employers and workers because of lots of absenteeism, broken appointments, sick kids, continued school interruptions, http://etc.Now we have rising prices on just about anything ordinary people spend money on, and no politician is thinking about free money. Is is any wonder we have people running up their credit cards? What else can they do?
Tony Bennett
Tony Bennett
2 years ago
Reply to  Eddie_T
“What else can they do?”
Well, that is what we’ll find out. 
Business inventories building + rising prices … and a drop in demand?
Many recessions are due to inventory corrections.  IF US (global) to enter one, will it morph into something else (financial crisis)??
1-shot
1-shot
2 years ago
Reply to  Eddie_T
What else can they do? How about spend less, cut up credit cards, get personal debt under control and live within their means instead of borrowing at 25% interest
dbannist
dbannist
2 years ago
What’s sobering to realize is that government debt just passed the 30T mark.  That’s nearly 2x what everyone else in America owes per the link above from Mish.
Imagine what your balance sheet would look like if you suddenly owed another 2x as much as you currently owe.
Then….realize that as a taxpayer it’s not something you need to imagine….you actually owe it and you will pay it via higher taxes or inflation.
The smart investor invests accordingly.
Real assets are going to shine bigly in the next 20 years.  Equities that own real assets (mining companies for instance) will do better than those that own electronic assets (Facebook).  
Mish
Mish
2 years ago
Reply to  dbannist
Thanks I meant to post a link to US debt in that article.
Will do so now.
kiers
kiers
2 years ago
Reply to  dbannist
Facebook!  LOL!  I used to joke at the vapidity of the “Facebook Moat”.  All it takes is for a competitor to come out with another “social bulletin board” with better privacy features, or whatever is craze du jour, and use facebook itself to advertise it!  Poof!  Goodbye zuckerberg.
Maximus_Minimus
Maximus_Minimus
2 years ago
Reply to  kiers
Better security features appeal to a small portion of population, but the majority of the cannon fodder, they don’t mean a thing. Facebook has them firmly corralled.
Billy
Billy
2 years ago
Reply to  dbannist
Now imagine the interest on your debt per month is half of what you make(it’ll be that way within a decade). Then add 3-5% more debt each month. Then imagine the interest increasing 8 times this next year on that debt.
Nasty Edwin
Nasty Edwin
2 years ago
Reply to  dbannist
I’m of the mind of Mish that the stock market correction will be bigger than most can imagine…even the bears.  If that is the case, there will be few places to hide.  I am guessing all asset classes will get hurt, some earlier than others.  If the break in the dam continues to gush, investors will have to sell, out of fear or necessity, and we will return to a much more simpler way of living for many. 
dbannist
dbannist
2 years ago
Reply to  Nasty Edwin
THe difference between real assets and imaginary assets become readily apparent during deep recessions.  While everything goes down, those that actually produce stuff tend to fare far better.

So own miners, farmers (or equipment makers that farmers use), fertilizer companies, grocers, etc.  Those are the companies that won’t go belly up.

Mish
Mish
2 years ago
Reply to  Nasty Edwin
I used to think a long slow decline was a strong possibility. Not anymore. 
Now I think crash.
And despite widespread belief otherwise, that is not a word I use lightly for the overall markets. The last time I was a big crash advocate was 2006-2007 and we saw it in 2008-2009.There is a big difference between saying huge overvaluation and crash. The former may work out over time. The bubble is just too big now and liquidity is drying up fast.
Tony Bennett
Tony Bennett
2 years ago
Reply to  Mish
Welcome aboard!

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