Americans Accumulate Record Credit-Card Debt
A veteran economist recently echoed the concerns raised by Elon Musk and Michael Burry, warning about the alarming levels of debt held by American consumers. Carl Weinberg, the chief economist at High Frequency Economics, highlighted the imminent threat of a consumer-spending slowdown due to the surging credit-card debt.
A Wake-Up Call for American Consumers
Weinberg emphasized that consumers are financing their spending by relying heavily on credit cards, which has led to exorbitant interest rates. This realization is expected to result in a retrenchment in consumer spending as we approach the new year.
An Ominous Outlook
Elon Musk previously expressed concerns about the number of people living paycheck to paycheck and burdened with substantial debt. He warned that accumulating credit card debt with high interest rates could lead to dire consequences for individuals. Similarly, Michael Burry predicted a spending slowdown and recession as consumers depleted their pandemic savings and resorted to increased credit card usage.
Industry Experts Share Worries
Various industry experts, including Ken Griffin, Bill Gross, Jeff Gundlach, Bob Michele, Mike Wilson, David Rosenberg, and Stephanie Pomboy, have also raised concerns about the financial situation of American consumers. They have pointed out that consumers have faced a double-whammy of soaring inflation and rising borrowing costs over the past 18 months.
An Economic Slowdown on the Horizon
Weinberg anticipates a pullback in household spending, leading to an economic slowdown rather than a full-blown recession. However, he acknowledges the non-trivial risk of consumers encountering financial troubles. Recent data from the New York Fed reveals a significant increase in credit-card balances, delinquencies, and overall debt loads, while real incomes have failed to keep pace with mounting borrowing costs.
Addressing Inflation and Future Rate Cuts
Weinberg attributes the spike in inflation to the monetary and fiscal easing implemented during the pandemic. He expects inflation to normalize in the near future and foresees the Federal Reserve reducing interest rates substantially in the coming year.
It is essential for American consumers to proactively manage their credit card debt to avoid the potential economic consequences. By reducing reliance on credit cards and seeking financial guidance, individuals can navigate the challenging landscape of rising debt and inflation.
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By: tmohamed@insider.com (Theron Mohamed)
Title: Americans Drowning in Credit-Card Debt: Economist Warns of Economic Consequences
Sourced From: www.businessinsider.com/elon-musk-michael-burry-weinberg-credit-cards-consumer-spending-recession-2023-12
Published Date: Thu, 07 Dec 2023 13:22:09 +0000
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