- The latest Federal Reserve consumer credit report released on Tuesday.
- It shows record levels of outstanding credit in February: $4.2 trillion.
- With unemployment rocketing, another financial crisis is around the corner.
Total outstanding U.S. consumer credit stood at nearly $4.2 trillion in February. According to the latest consumer credit report from the Federal Reserve, seasonally adjusted consumer borrowing increased by 6.4% in February.
As the economy flails through the worst financial crisis in living memory, consumer credit has become a massive liability to consumers and lenders alike.
Consumer Credit Bubble Creates Great Recession Echo
Just before the 2008 financial crisis, total outstanding consumer credit was a comparatively “paltry” $2.6 trillion.
Financial legend Warren Buffett once wrote in a 2001 letter to Berkshire Hathaway shareholders:
After all, you only find out who is swimming naked when the tide goes out.
Well, the tide just went out, and the consumer credit data show many were swimming naked.
Americans were borrowing at record levels just before the COVID-19 pandemic rocked the world. At the time, employment and earnings were also soaring at record highs.
The Brookings Institute estimates:
In 2019, the three components of income growth imply a growth of 2.1 percent in median household income for the 2018 to 2019 period, suggesting a rebound from slower growth in 2017 and 2018…
That put U.S. median household income at record levels just before the COVID-19 pandemic and economic crash hit this year.
Sentier Research, a firm headed by former Census Bureau…