Americans Are Broke (Again)

By John Del Vecchio and Brad Lamensdorf

Soon after COVID hit, Americans were flush with cash. Americans saved at a record pace with nothing else to do but sit at home.

Some decided to speculate from their couch on equities, options, and cryptocurrencies. But plenty of folks stuffed the stimulus money under the mattress.

For a little while…

The chart below shows that the personal saving rate has fallen to just 2.2% from over 14% in two years. This is well below the 50-year average of nearly 8% and the lowest since 2006-07, before a major financial crash.

Personal savings rate in America

With inflation reaching multi-decade highs, Americans are tapping into savings to stay afloat.

Many others are engaging in America’s favorite pastime, buying stuff they don’t need with money they don’t have and paying 25% interest on their credit card balance.

Either way, the plummeting savings rate is a significant recession warning.

In addition to nosediving savings, folks are spending on their credit cards. Credit card balances have surged back to pre-pandemic highs. Consumer loans are hitting 20-year highs as well.

Credit Card Balances vs other consumer loans

This double whammy of practically no savings and high-interest credit card balances and loans tends only to end one way…badly…

Originally Posted January 23, 2023 – Americans are Broke (Again)

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