The Fed is Puzzled Younger Borrowers Are Struggling with Credit Card and Auto Payments
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23 comments on The Fed is Puzzled Younger Borrowers Are Struggling with Credit Card and Auto Payments
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23 Comments
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1 year ago
It shouldn’t puzzle the Fed. A generation that became financially aware after 2008 have only known a Fed induced low rate economy. Zero rate policy was introduced in 2013. The intent of zero rates was to inflate asset prices, giving owners of those assets a sense of wealth. The perception of prosperity encouraged spending through borrowed cheap money. While saving was discouraged because of low interest rates. Older borrowers bank on debt against the value of their inflated assets. Younger borrowers, and lower class workers, own few assets that have inflated. With no leverage to borrow against, they struggle to pay debts in an inflationary economy. Why younger borrowers are imbued with a sense of wealth and acquire debt is another story.
1 year ago
5% on a savingsaccount 7 or 8 % for a mortgage ……pure nostalgy…. that’s when western economies were still HEALTHY with healthy economic cycles ….till western central banks started messing up things like never before , a demise that must ve started somewhere post 9/11 ….
1 year ago
Fools…. they should ve gotten into oil ….
1 year ago
GenZ is the first generation to have their future completely borrowed out from under them before they were even born.
1 year ago
Biden forgiving student loans has taught younger generations that taking on debt is OK. You don’t have to pay it back.
1 year ago
The fed is puzzled because they don’t know whom to blame for higher interest rates and inflation. Kind of like when I’m in the kitchen and break a glass, my wife looks over and I’m puzzled about whom to blame.
1 year ago
They know why interest rates have gone up. They purposely did that. Inflation is something they may be puzzled about.
1 year ago
No mention of rent by the Fed. Moronic or insane?
1 year ago
So how many EV’s are about to be repossessed??
1 year ago
This is really comedy. They squash consumers like bugs so they can take care of the big banks and the rich. Now they are wondering why they can’t pay their bills. Hilarious!!
1 year ago
Younger folks tend to not cook as often as older people so youngsters are not only facing higher food costs but also higher labor and energy costs that are being passed on to consumers in restaurants.
1 year ago
Also explains rising rates of obesity and type 2 diabetes.
1 year ago
The Housing Bubble showed 20 yr olds started delinquencies and peaked first, followed by 30 yr olds, and then the rest of the population. I would expect something like that because younger workers have less savings and lower earned income than older people. This credit delinquency cycle is starting off worse because 30 yr olds have the most delinquencies, wit 20 and 40 yr olds very close. Those 50 yr and older are in better shape; however, there is a clear financial division forming between younger and older than 50 yrs old.
1 year ago
With high student debt partially caused by large numbers of young adults in college because good paying manufacturing jobs have been offshored in the name of free markets? Combined with bringing in millions of illegal aliens to reduce wages.
1 year ago
Most of the increase in college enrollment is due to more women going to college. I think there are 50% more women in college than men. I don’t think lack of manufacturing jobs and illegal aliens explains it.
1 year ago
DIA closed < May 4 high. A supply line coming from Jan 2022 to Dec 1 high bent DIA back. DIA might popup above, or plunge. SPX, same bs.
If u make a sandwich money, a trifle, take what the market give u : 1.01^52 = 1.66/Y.
1 year ago
The 30’s, the red line Lazer : 2011 to Jan 2018 highs. The c/c delinquencies made a rd trip to the Lazer, breached it at Jan 2018 high level.
The beam is hot. millennial cannot stay inside. Either pop above, or decay.
The CPI y/y is rolling over. Epstein Island econ 101 PhD prof says : 0.50% up, next time.
The Dow : 43TD to the top, 43 TD to Feb 14.
1 year ago
The obvious – real weekly earnings down
link to fred.stlouisfed.org
Not so obvious – the moronic policy of rent moratorium / loan forbearance of 2020 / 2021.
Folks who easily afforded a new car when they didn’t have to pay the rent … found quite another situation when they had to pay rent (and surging rent at that).
1 year ago
“In 2021, according to the Gini coefficient, household income distribution in the United States was 0.49. This figure was at 0.43 in 1990, which indicates an increase in income inequality in the U.S. over the past 30 years.”
The economy is being run in reverse.
Money is not neutral. It takes increasing infusions of Reserve bank credit to generate the same inflation adjusted dollar amounts of gDp.
1 year ago
Economists for $1000, Alex –
“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
a) Milton Friedman
b) Milton Keys (hat tip to AOC)
c) Mish
1 year ago
I’ve never agreed with that. I think inflation is always due to an imbalance between supply and demand. If people have more money, that will likely increase demand, but it’s not guaranteed to.
1 year ago
It is amazing the things you don’t see or understand when you have your eyes wide shut. The Fed is going to have to dial up the jawbone-o-meter to ludicrous mode on this one…
1 year ago
Forced to spend 40% more on a car because of the Great Lockdown, and at 2x the interest rate – it makes a ton of sense that young borrowers are struggling with payments. And since they qualified for the auto loan in 2021, any margin they had in their household budget has been eaten up by inflation until their next raise or longer. Can’t live without a car, and if your auto cost went up 80% is that in the CPI?
Your articles a few months back on the auto situation are spot on and playing out.