Biden Leaves Americans Financially Crippled

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( – The financial strain on American households is intensifying, exacerbated by dwindling savings and escalating interest rates imposed by the Federal Reserve. Data reveals an alarming uptick in overdue payments across a variety of debt types: credit cards, auto loans, and mortgages.

Fitch Ratings disclosed that 60-day delinquencies on auto loans for people with poor credit reached a record 6.1% in September, the highest since Fitch began keeping records in 1994. Meanwhile, Federal Reserve statistics show that the rate of credit card payments overdue by 90 days rose to 5.1%, a significant jump from 3.4% in the second quarter of the previous year.

Experts note that this trend of increasing late payments may reflect financial stress among consumers. Herman Poon, a senior director at Fitch, emphasized that despite this surge, delinquency rates have not yet reached the pre-pandemic levels observed between 2017 and 2019, which were generally over 1%.

Equifax reported that U.S. revolving credit debt, including credit cards, soared past $1 trillion in August. Bank card balances alone escalated by 18.1% year-over-year, reaching $851.4 billion. Moreover, 60-day payment lateness increased to 1.8% in 2022, demonstrating a steady rise throughout the previous year.

Many attribute the initial plummet in credit card usage and loan balances to the financial assistance provided by the Trump and Biden administrations during the pandemic. This government aid led to an accumulation of savings, which are now depleting, causing late payments to resurge.

Economists believe that these signs do not necessarily point to an economic downturn but indicate a return to pre-pandemic norms. Dean Baker, an economist with the Center for Economic Policy and Research, argues that the increase in delinquencies merely reflects a reversion to previous levels, as the cushion provided by pandemic checks is exhausted.

Federal Reserve Bank of San Francisco researchers suggest that pandemic-induced savings, initially estimated at $2.1 trillion, were mostly used up by June, with only about $190 billion remaining in the economy. This decline in personal saving rates coincides with the surge in credit usage and delinquencies.

The wider landscape suggests that only a fraction of U.S. households, roughly one-fifth, have income from dividends, interest payments, or rentals. This indicates a financial chasm between those who can accrue passive income and those who can’t, highlighting the socio-economic divide in the country.

In summary, while the escalating delinquencies are concerning, they appear to be a reversion to pre-pandemic levels rather than a forewarning of economic collapse. Nevertheless, the situation calls for vigilant observation and potentially targeted intervention to support financially strained households.

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