U.S. Debt Is Ridiculous!

A special note from Edelson Institute Executive Editor Wayne Burritt: My friend and colleague Larry Edelson established The Edelson Institute to help investors protect and grow their wealth. Here’s a video about Larry, the Institute, and the team behind his on-going legacy. I hope you enjoy it. Click here to view the video.

It’s happening again.

You’d think we would have learned from the 2008 financial crisis. But consumers, governments and central bankers are back to their spending ways.

The latest installment comes from Federal Reserve data showing U.S. credit card debt topped $1.0 trillion in February, marking the highest level since January 2009.

I’ll let you catch your breath.

Yes, that’s trillion with a “T”.

And that’s not all: U.S. consumers have also amassed $1.4 trillion in student loan debt and $1.1 trillion in car loans.

All told, between credit cards, student loans, and car loans, U.S. consumers are saddled with a mind-boggling $3.5 trillion in debt.

I don’t know about you, but that ridiculous total just makes my head swim.

There’s plenty of blame to go around on how we got here.

For instance, years of ultra-loose monetary policy by the Fed encouraged consumers to borrow, hoping for a roaring economy to repay those debts.

In addition, lackluster wage growth and soaring healthcare costs have also pounded away at their pocket books.

In the meantime, the anticipated economic growth has been slow to materialize. And that’s fueled greater addiction to easy money. Consider …

  • U.S. student loan debt jumped more than 170 percent over the last decade.
  • March U.S. commercial bankruptcy filings jumped 28% on the month, while personal bankruptcies soared 40%.
  • Fourth-quarter U.S. auto loan delinquencies reached their highest level since late-2008 at $23.27 billion.
American consumers can’t do their part to stimulate the economy because they’re shouldering a staggering amount of debt.

Speaking of autos …

We’re starting to see cracks in the auto market, including three consecutive months of falling sales and rising loan delinquency rates. And that’s before a record 3.6 million off-lease vehicles come to market this year.

The fact is we’ve been screaming about soaring U.S. government debt and underfunded state and local pensions for the last few years. And the unsustainable consumer debt pile that I’m talking about today is nothing new.

Sure, all is well as long as U.S. financial institutions and foreign investors have both the resources and desire to fund the debt.

But as soon as the U.S. economy weakens, the U.S. dollar falls in value, or confidence is shaken in some other dramatic fashion, investors will rush for the exit doors.

And that’s going to put even more pressure on the government to get cash in just about any way they can: More taxes … more fees … more intrusions … and, sure, outright confiscations.

And that’s why I recommend my members stay away from owning U.S. Treasury securities and purchase high-quality blue-chip companies on setbacks. And above all: Know when to buy, not just what to buy.

Good investing,

Mike Burnick

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Comments 46

  1. Terry Smith April 12, 2017

    I have been sitting on cash for sometime and have been reluctant to invest in any stocks of commodities. What is your take on where we are in stocks or commodities? Thanks

    Reply

  2. Joe Maxwell April 12, 2017

    I have read that the best stocks to buy are those of producers of items people cannot do without no matter what. We can think of those necessities in our own life and find out who makes them.

    Reply

  3. Stephen April 12, 2017

    If Treasuries get hit hard, so will shares of high quality blue-chip companies.

    Reply

  4. Mark April 12, 2017

    Would you recommend selling Apple right now or holding?

    Reply

  5. David Ecklein April 12, 2017

    Mike-

    Your message is important. So many people are fixated on government debt that no one is watching the immediate neighborhood. As productivity is ever increasing, the time will come when folks can’t buy back what they produce. They already owe too much to borrow more; all the artificial incentives to consume will no longer work. What are we facing – in one dirty four letter word: Glut.

    Reply

  6. Rockson Ankomah April 12, 2017

    That is great

    Reply

  7. Mike April 12, 2017

    Voodoo economics gave birth to the debt monster. Federal government debt has increased 2,000% since 1981. The Bush written NAFTA Trade Treaty signed by Clinton and subsequent corporate giveaways decimated the earnings of millions of Americans. We now consume more than we produce. Our economy does not function because of hard work, enterprise and self reliance, it functions on debt. Our economy is driven by people and the Government spending money they don’t have on things they don’t need. Whether its a car, a new handbag or another Aircraft Carrier its all purchased with borrowed money.

    Reply

  8. Lynn Eggett April 12, 2017

    Long Dry Spell on what’s happening IN DETAIL out there.
    Time for some UPDATE. What is written above, we already know. It just wastes both of our time.

    Thanks in advance
    Lynn Eggett

    Reply

  9. Jack green April 12, 2017

    I don’t think there’s a person on this earth that knows “when to buy”. I’ve used the exit strategy whereby if my stocks go down 5 pct, I sell. Wait until I feel they have bottomed out and start re-buying. This is a tough call. Who knows where the bottom is? The typical market correction is about 10 pct every 8 years. When was the last correction? 9 yrs ago. We’re overdue. Should we be selling? Who knows? We may have a bull market for the next 5 years. You’re suggesting the impossible.

    Reply

  10. Jeff April 12, 2017

    That level of consumer debt is staggering. On top of that, the lenders are totally irresponsible. Knowing all the debt that exists and that a huge % of the jobs created were part-time, mostly due to companies avoiding Obamcare rules, the lenders have to know that the consumer ability to pay is tenuous at best under those conditions. I guess they depend on history and their bought and paid for politicians for another bailout. Oh wait,I forgot, we have the new, since the 2008 debacle, Obama/Elizabeth Warren Consumer Protection Dept in the Federal gov’t and Dodd-Frank. What could possibly go wrong??? This will never change until people start going to jail instead of getting bailouts.

    Reply

  11. John Henderson April 12, 2017

    As anyone who follows the true situation know, US government debt will reach 30 billion in just the next ten years.
    At the same time, the (immoral?) demands that citizens are making on their society will bring the off the book liabilities ever higher, and to place upward pressure on the overt debt. This, by itself, will make rationalizing tax policy ever more impossible with the need to “replace” lost revenue, which leads to short term thinking. Which of the peasants will continue to work and to invest when they realize that they are truly a minority? One could argue that there has been a moral failure at every level, from politicians on down.

    Reply

  12. Hank April 12, 2017

    All True. The bailouts went to the Big 6 Banks who used the “free” recapitalization to lend cheap money to Corporations for “stock buy backs” . Further the Big 6 acted as middlemen in the Bond markets profiting off $$$ created out of thin air and becoming “public debt”. Finally the Big Banks have significantly increased derivative exposure and market investments in hope of finding more profit. The indebted consumers are not business savvy and have short term goals/rewards in mind.( Gee not much different from the Banks and Corporations) Now add sluggish growth and sluggish job creation to the mix and ever more deflationary forces such as outsourcing, automation/robotics/computerization, self-check outs booming and online retailer giant Amazon and we have a recipe for another recession in the midst of this depression. Not rocket science but when an ever increasing percentage of the population can hardly afford to consume, eventually the economy grinds to a halt.

    That said the entire paradigm is illogical and not sustainable. A FED system built on continuous expansion of debt (and therefore continuous expansion of consumption) in a FINITE world is INSANE and bound to eventually fail.

    Reply

  13. keith lawrence April 12, 2017

    Two things I have to comment about

    1/ You say credit card debt has been higher before.
    2/ You have been telling us for years about excessive debt.

    Nothing has changed in government and banks which in my opinion control and maintain excessive debt and they won t allow a collapse in the stock market.
    They also hold down the price of gold so it can not be considered a currency as the paper money system would collapse

    My question to you is about timing. For years you have been predicting the worst.

    When will this debt level adverse the stock market strongly ? 1 month ? 1Year ? 10 more years?

    regards
    keith

    Reply

  14. Jim W April 12, 2017

    I have credit card “Balances” but I pay the full balance each month like millions of others. Your comments are inflammatory & untrue for many of us.

    Reply

  15. Steve April 12, 2017

    ok. enough of the obvious stuff please Mike.

    You’re going to earn more credibility if you let me know when to trade.

    Honestly, I can do without the well known current events issues (things I can read on ZeroHedge) thanks.

    Reply

  16. Frank April 12, 2017

    I would appreciate your ideas about buying Swiss francs or Canadian money with excess dollars I have…..Thanks

    Reply

  17. willmarkid April 12, 2017

    With all those un-qualified loans made with 5 years due maturities we will see used car lots filled with re-posessions and no buyers. This exactly what happened in the housing market If your thinking of buying another car I suggest you just wait awhile..

    Reply

  18. Harry April 12, 2017

    Thanks for the info, Mike. You have done a great job since our loss of Larry.

    Reply

  19. Steve April 12, 2017

    All true. Housing to fall in next three months. Debt ceiling comming up again. Minnesota with a big overage. Troops want to spend it all. Dayton says no that a down turn in economy is comming. Wow a thinker. Not so fast he wants to take on more out of the country people with no money. If what I heard of it is true the money spent to give to those in need is not comprahendable. They get free bus tickets here from other states and what to do to when they get here and how to get it all.

    They call us Moneysota for short. Cost of all revenue to give a dollar in benefits is 70 cents on the dollar and going up.

    Health care out of control, health care coaches trying to keep people out of hospitals. Many are working with million dollar a year costs patients. From outside the country, now here. Get unlimited medical and if not go to the hospital for headaches, tired, bloody nose, over weight, pain killers and many are in four or more times a week.

    Clinics get 40 percent of the bill paid because of the Medicare fixed program. So doctors are now seeing 40 to 50 patients in a eight hour shift to make more money. Quality visits are a thing of the past.

    If you ask me we have lost it in every area of life.

    Military bases in 130 countries. Will God give us what we pray for as a country or what we deserve?

    Oh my!

    Reply

  20. Frank April 12, 2017

    “…purchase high-quality blue-chip companies on setbacks. ”
    What quality? These corps are set back alright…in debt past their eyeballs from stock buybacks with the same easy money. The stock market is on its way to the same deb-fueled hell in a handbag.

    Reply

  21. Tom Beach April 12, 2017

    I feel very insecure having my money in an IRA where the government can freeze my account and demand that I invest some or all my money in U.S. bonds or treasuries. Or worse, freeze my bank accounts and tell me that I can only withdrawn a small amount per day or week.
    I need to get my funds offshore into a safe bank. I am working on it. Singapore seems safe. Hong Kong doesn’t.
    Hong Kong is under the People’s government thumb.

    Reply

  22. GDC April 12, 2017

    Good Grief! We never learn. Of course Washington sure doesn’t lead by example and tighten their belts. There will come a day when it is simply too late.

    Reply

  23. JB April 12, 2017

    It looks like we are in a tub of s===!

    Reply

  24. Nicolas Bauer April 12, 2017

    “Know when to buy, not just what to buy” is your last sentence and it’s true.
    That is precisely why I’m subscribing to your investment letter. But all
    I’m hearing is …not yet…..we will let you know when..!?

    Isn’t there anything that is a great investment …now? What is it?
    Would love to have that question answered.

    Thanks,
    Nicolas Bauer

    Reply

  25. Dan April 12, 2017

    very general stuff…………where’s the beef???

    Reply

  26. Raymond April 13, 2017

    I prefer real estate. (Fixed rate loans).
    The IDEAL investment.

    I income
    D depreciation
    E equity build up
    A appreciation
    L leverage

    As for reits, I like “o”, but not at 60.
    If it comes down to 35-40, I’m buying!

    Reply

  27. meyer April 13, 2017

    We see the gov’t spending more than they take in and seem to get away with it, And it emboldens us citizens to do the same, so we borrow and pay interest on our purchases and think we’re fine. But when it hits the fan, many people will lose everything, homes, cars, jobs. Just 1 case in point. A single woman with a good job in 2008 bought a swimming pool on a loan against her mortgage. She couldn’t keep up the payments and lost it all.So why are we doing the same dumb things again?

    Reply

  28. James Tazewell. April 13, 2017

    Inflation is the only possible way out of such debt, and it needs to be around 100% in a decade. Helicopter money may be the most practical way of creating such inflation.
    P.S I have a $100 trillion banknote – ZDP!
    Jaytee.

    Reply

  29. Luc April 13, 2017

    Should a government not more invest in their students than in weapons….1 T loans for students is limiting the future of so many students and favorizing the future of the students with rich parents…..democratic….,

    Reply

    • Steve April 13, 2017

      Good point on students loans. Interest going to go negative in this next year or so. This to pump up another false economy. Buy with a loan and they pay you interest, it’s comming. But problems is that debt level on credit cards, home and car loans are maxed out again. Inflation has put the middle class up to the nose in debt.

      This time the free interest loans where they pay you take one out as to stimulate the economy will fail. Middle class is full up on credit and the mast majority will not even be able to take on a loan. Backlash

      Banks will sit on the fiat currency the (U.S.Dollar) . The notes will come due and not be paid. Inflation on core costs will rise and defaults will pile up. We will implode just like 2007 but on a major scale 2007 was a baby. Sales Will fall deeply in every market. Car and home market will implode this year.

      A new wire currency will replace paper but get hacked bad. It will be replaced by a chip under the skin like my cat.

      The main king pins in major hospitals will not admit this, but they are being told that in 2018 or 2019 all new borns will be required to have a chip put in at birth. No Joke.

      Back to school loans my daughter school loan we are paying was 50k now down to 22K. The fixed rate is 8.%. If you don’t agree, no education. Nice. We are Property & School loan poor. OUR Son 2 years left we are paying as we go. He might join the military to be a doctor.

      Hard to look forward seeing what is coming. God Bless

      Reply

  30. Roger Montgomer April 13, 2017

    $3500MMM / 350MM people=$10M per person. Why is this so huge?
    Is my math wrong, or is your understanding of size of consumer debt wrong?
    If they pay 15% interest, then that is 1500/year or just over $100 per month interest.
    Again, in real terms, that is peanuts considering what a $100 really is worth.
    Would Larry make such a bold overstated Henny-Penny Ridiculous! with a T claim?

    Reply

  31. Dick Braatz April 13, 2017

    So much damage has been done to this economy, country and world over the last eight years, a major cleansing or adjustment will needed. It’s frightening. As a retiree, we’ve lived through the Golden Era. Dick B

    Reply

  32. Vasco Garcia April 13, 2017

    Dear Mike, the US consumer lives in a paradise! Compared to the Portuguese, indebted to the bone due to greedy and irresponsible banks and politicians, you’re in a heaven-like society. Happy Easter!

    Reply

  33. Dan April 13, 2017

    If only we had jobs to pay back the loans, maybe we can have a bail out, Oh I know, let’s manipulate our currency.

    Reply

  34. Mark Woods April 13, 2017

    Where would you recommend keeping your cash reserves while waiting for the right time to buy stocks?

    Reply

  35. Ohio Bob April 13, 2017

    When will the debt bubble break?

    Reply

  36. Scott April 13, 2017

    I agree with all you say. Enjoy your articles and use as a guide. I have been preaching, “We are but two steps behind Japan since 1999”. In 2004 I predicted 0% interest bound rates following Japan’s lead. Rode the market to its high in July 2007 and went to total cash, did not re-enter the market until early 2010. Once again went to total cash January 2015, Have been Swing trading since then. Bought large position in “SLB” at @80 – sold in 31 days @$88. That was my largest trade so far. It beats holding a bond for 1.2%. I lost my job in 1993 and never went back to work. At age 72, I am waiting for the DOW to pull back to 15K+/-. Trump has only delayed the pull back, there is no real future growth left in the USA. Where can Walmart build another store and not eat its profits down the road at another location. Growth isn’t expanding, just shifting from brick and mortar to the Internet. I go to my bank about once a year, the rest is done on line — pay all my bills online or by bank draft. Enough said. Good luck to all.

    Reply

  37. Ron Kyewski April 13, 2017

    Mike,

    While I was overseas on vacation, I learned that Larry Edelson passed away. I was shocked and saddened since I respected his knowledge and candor. Just so I know, how did he pass away?
    Thanks. I hope you carry the torch forward successfully. Big shoes to fill so I know you feel that……

    Reply

  38. Patty April 13, 2017

    Can someone please give us a break down each month on the total new jobs that are created? I would like to see how many are part time and how many are full time. I believe a job is given a full time designation if it is over 33 hours per week. The way the media reports one would believe that a part time job is equal to a full time job. In my book, a job must be good for 40 hours to be called full time. It is amazing how we are lied to everyday. HELP US !!!

    Reply

  39. Graeme April 14, 2017

    The piper always has to be paid. It’s not if it’s when. Sure going to be interesting. Maybe too interesting!

    Reply

  40. Dr Rob Lee April 14, 2017

    Toshiba admitted yesterday they will not remain a viable business anymore. Westinghouse (nuke plants) bankruptcy – broke them.

    I think this is the beginning of unwinding of the debt problem.
    Japanese central bank owns all the corporate stock. Blue chips, et al… ECB is buying up all corporate bonds/stock using negative interest rates. No one really knows what the FR (federal reserve) is buying besides bonds – including foreign debt.

    FR trying to sell a “$4.5 trillion” portfolio of stock. U.S. consumers (credit cards, student loans, and car loans) “$3.5 trillion” in debt. States and local government pensions
    “$2 trillion” debt. US gov. $200 trillion debt.

    I’m sitting on cash, gold, silver – no stock or bonds.

    Reply

  41. Michele simko April 15, 2017

    Thank you

    Reply

  42. Russ Allen April 17, 2017

    We will all be in a desperate situation when the “Deep State” and the IMF decide not to have the US dollar as the world currency. It will happen eventually once the rest of the world finally realizes that they cant rely on a currency that is leveraged to the hilt in debt. The “Big Money” (banking institutions, brokerages, billionaires, etc) are already positioning their wealth to avoid what will happen to the average Joe investor. The little guys are the ones who are victims to the “wealth transfer” that occurs after the melt up which is induced by “Big Money”. These are the people who control the futures and options market, therefore they know which way to position their money prior to the event. This melt up of the market always occurs before the big fall correction happens. For instance, there is no reason whatsoever the VIX index should be as low as it has been for so long. This index has been artificially suppressed to create a “head fake” so to speak, whereas to convince the people into believing that all is fine. I cant see any fineness in all the news that I observe on a daily basis. If anyone out there can point the direction towards the good news please feel free to give examples. I just don’t see any at this time. My strategy has been to invest in the “Must Have to Survive” no matter what happens. Sectors such as food, water, energy, and basic medicine etc. I have been researching SDR denominated bonds issued by the IMF, but so far they appear only to be available to the “Big Money” folks. These will most likely be backed by a new currency, or a currency basket, possibly even a gold backed digital currency of the future. Who knows, or should I say (“we will be the last to know”). Anyone with information on this topic, it would be greatly appreciated.

    Reply

  43. R. April 17, 2017

    Put options…..

    Reply

  44. Marian April 24, 2017

    I think maybe Trump will TRY a lot harder to make this country great again, than Clinton would have…(if she had become president, we would have lost our country to foreign take overs). Trump may make some mistakes, but I sincerely believe he is genuinely trying to make things better. The economy goes in cycles…and based on the K wave, we will have a major depression- but Trump will ask, learn from others as well as from us on twitter, and we will climb out of the depression a lot more quickly than if anyone else was president…because he Truely cares, as a U.S. citizen who is switching the U.S. Constitution back to many of ways the laws were written when my ancestor: PRESIDENT GEORGE WASHINGTON wrote and signed it.

    Reply

  45. terry shead April 25, 2017

    War is the answer, and this madman trump is going to give you it, the cfr or the deep state will see to that.

    Reply