U.S. PERSONAL DEBT SOARED IN 4TH QUARTER

By Mike McCune 

Everyone knows growing older isn't all it is cracked up to be. But, for the first time, aging Americans are facing a debt problem.

Back in the 1960s when universal credit cards were first introduced, the Greatest Generation largely shunned the offer--memories of the harsh reality of the Great Depression were too firmly entrenched. The Greatest Generation gradually accepted the cards as a way to ease their movement without the encumbrance of cash but they usually made sure to repay the bill immediately.

But then came the Boomers. They used the cards willy-nilly but, like their parents, largely stayed within budget at first. As time passed staying within budget was considered passe and the burden of personal credit began an insidious march into the American psyche.

Boomers are now facing retirement. The grim reality staring the vast majority in the face is a diminished income enhanced by a mountain of debt. The choice seems to be simple: work longer or make drastic spending cuts in order to keep the household above water.

In a report released by the Employee Benefit Research Institute (back in the 50s and 60s who knew you'd need someone to establish a research firm just to track employer-provided benefits!) it was disclosed that people 65 to 74, in other words Boomers who have retired, currently haveFIVE times the debt load the same age bracket had just 20 years ago when the last of the Greatest Generation headed into retirement.

The bad news doesn't stop there. In the same report the median savings for U.S. households within 10 years of the retirement age has shrunk by 32% to less than $15,000 in the past decade because of the recession.

All of this hits at the same time rates for mandatory healthcare have rocketed upwards. The combination of hits is making it much more unlikely that as many as four in five aging Americans will be able to retire on the government's projected timetable when they were still school kids. But as bad as the Boomers were in staying on a prudent fiscal course, the two generations since are lagging even those low-bar numbers.

The harbinger of an economic collapse is riding in the disparity between income expectations, debt load and planning shortfalls at all age levels in America

particularly since the Fed seems intent on raising interest rates.

The Federal Reserve Bank of New York reported yesterday that the average American household increased its debt load by 1.8% in the fourth quarter. Compared to an economy that registered only 1.6% gain over the previous year, this means the typical household lost ground in the financial fight for their future during the Christmas season. The horrendous news was that the average household in America now owns a personal chunk of the $12.58 trillion individual debt.

This is not government or business debt but I-N-D-I-V-I-D-U-A-L debt and it is approaching critical mass weight. This uncertain, mortgaged future is a result of the average American following the lead of the government and kicking the can down the road. The government doesn't have to earn the revenues, it can just print more debt bonds, bills and notes, the citizen cannot.

This hidden pressure is what is an underlying cause of the public turmoil we are witnessing. Trump has promised to largely quash the entitlement programs. Without that meager individual resource, many American households will simply fail overnight.

The New York Fed's report wasn't done throwing the ice water around. "This marked the largest quarterly increase in household debt since the fourth quarter of 2013. Debt today is now just 0.8 percent below the peak of $12.68 trillion hit in the third quarter of 2008." That was at the height of the financial crisis meltdown. The Fed report showed every type of debt climbed in 2016's final quarter compared to the final numbers from the third quarter. Mortgage debt, auto loans, and student debt all jumped faster than the economy in a range of 1.6% to 2.4%. But credit card balances simply shot off the charts with a 4.3% increase and that was the biggest category to start the cycle.

The Fed tried to say the increase was "partly driven by new extensions of credit" in mortgages and auto loans. But that belies the huge increase in credit card use.

The only allusion to Americans' necessary 'fix' of credit card usage in the report came when the Fed tried a lame explanation. "The composition of the debt is vastly different as the growth has been driven by non-housing debt. The rebound has been led by student loans and auto debt with only sluggish growth in mortgage debt."

Fantastic, except that statement destroys the Obama Administration's claims of "solid rebounds in the housing market" since 2010. If that were true then the mortgage loan numbers would reflect that.

What this shows instead is Americans have followed government's lead and are addicted to overspending while never thinking about the consequences. The Baby Boomers were the first generation to come of age with easily-obtained credit. The lifestyle may have been enhanced by overspending at the time but the piper has to be paid. That is coming when normal retirement should be happening.

Suddenly, for every American out of high school, the Golden Years are rusting every time they satisfy a want over a need by using credit. Nearing retirement they are finding Debt is the most unrelenting master of all.

"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson