US Household Debt Hits Record Level, Is Bitcoin The Solution?
According to the Federal Reserve’s Quarterly Report on Household Debt and Credit, total US household debt reached a record $14.15 trillion at the end of the year. This follows an increase of $193 billion, or 1.4%, in the fourth quarter of 2019.
The report noted that total household debt is now nominally $1.5 trillion higher than the pre-recession peak of $12.68 trillion in the third quarter of 2008.
It has been the 22nd consecutive quarterly increase in household debt which has been led by mortgage balances. Housing balances rose $120 billion over the quarter while non-housing balances soared $79 billion in the fourth quarter to hit a record $4.2 trillion.
Student loans, auto loans and credit card balances make up the bulk of this frightening statistic.
Senior vice president at the New York Fed, Wilbert Van Der Klaauw, noted that the data showed that “transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers.”
Goldbug and bitcoin detractor Peter Schiff blamed a weakening economy for the increase which is contrary to what the president has been claiming about the financial state of things in the country.
“If the economy really was strong households would have the added incomes to pay down their debts. Instead a weak economy has forced more families to go even deeper into debt to survive.”
Banks are yet again at the center of the crisis as interest rates plunge into negative territory and the central bank continues to bail them out with its ongoing repurchase agreements.
This hasn’t stopped the president Trump granting them huge tax breaks enriching the billionaire bankers at the top while the average US household is plunged deeper into debt.
Bitcoin a Saviour
A devaluation of the dollar, results in weaker purchasing power and a propensity to borrow more money.
Plunging interest rates also discourage people from holding any savings. This happens in a society where consumerism rules and citizens are encouraged to over spend in order to keep the economy afloat and further enrich those at the top of it.
It all points to one thing and that is safe haven assets such as bitcoin and gold, both of which have been rallying strongly this year as economic clouds darken.
Ethereum can now also be considered a store of value as it cements its position as the foundation of an embryonic decentralized finance ecosystem.
Will bitcoin and Ethereum be the answer to rising debts. Add your comments below.