The Coming Debt Reckoning | Zero Hedge

American workers, as a whole, are facing a disagreeable disorder.  Their debt burdens are increasing.  Their incomes are stagnating.

There are many reasons why.  In truth, it would take several large volumes to chronicle all of them.  But when you get down to the ‘lick log’ of it all, the disorder stems from decades of technocratic intervention that have stripped away any semblance of a free functioning, self-correcting economy.

The financial system circa 2017, and the economy that supports it, has been stretched to the breaking point.  Shortsighted fiscal and monetary policies have propagated it.  The result is a failing financial order that has become near intolerable for all but the gravy supping political class and their cronies.

Take consumer spending.  This is the primary driver of the U.S. economy.  Yet it requires vast amounts of credit.  In fact, American consumers presently hold $1 trillion in revolving credit.  At the same time, they have nowhere near the income needed to finance these debts, let alone pay them off.

Remember, the flipside of credit is debt.  Obviously, the divergence of increasing debt and stagnating incomes is a condition that cannot go on forever.  But it can go on much longer than any sensible person would consider possible.

Debt Slaves

If you haven’t noticed, the financial services industry is extremely accomplished at compelling people to go whole hog into debt.  Moreover, the entire fiat based financial system, which depends on ever increasing issuances of debt, hinges on it.  Just a slight contraction of credit, like late 2008, and the whole debt repayment structure breaks down.

On an individual basis, there are only so many credit cards that can be maxed out before the shell game ends.  Wolf Richter, of Wolf Street, recently clarified the relationship between the economy and deep consumer debt:

“The US economy is fueled by credit.  Americans turning themselves into debt slaves makes it tick.  Take it away, and what little growth there is – nearly zero in the first quarter – will dissipate into ambient air altogether.  So it’s time to take the pulse of our American debt slaves.

“In a new study, life insurer and financial services provider Northwestern Mutual found that 45 percent of Americans that have debt spend ‘up to half of their monthly income on debt repayment.’  Those are the true debt slaves.

“Excluding mortgage debt, Americans carry an average debt of $37,000.  Of them, 47 percent carry $25,000 or more, and more than 10 percent carry $100,000 or more in debt, excluding mortgage debt.

“Most of them expect to get out of debt before they die, but 14 percent expect to be in debt ‘for the rest of their lives.”’

Source: The Coming Debt Reckoning | Zero Hedge

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