The answer is not much, and this makes no sense because according to the US consumer pricing guidelines, we saw a big jump of 6.2% in October. This is the biggest inflation surge in more than 30 years. Everyone knows that gas prices are through the roof, and there are more open shelving units at our local Walmarts, Targets, and grocery stores than I have ever seen before. I’m not a doom and gloom type of guy, but, I do see things happening that don’t make a lot of sense.
American households are carrying record amounts of debt again. At the same time home and car prices are surging. The effects of Covid are being minimized because new infection numbers continue to fall daily, so that’s not the problem.
Interestingly, between July and September 2021, residents of the United States raised the bar to a record of $15.24 trillion. So, Americans are clearly getting out and spending again. This number rose by 1.9% during those months. That’s $286 billion in new debt that Americans took on in just a few months.
More importantly, U.S. residents increased their credit card balances by $1.1 trillion since the end of 2019. I’m not trying to confuse you with these numbers, but I am very concerned. Why am I concerned? Because the bankruptcy courts remain relatively calm. Filings are not up anymore than they were the year before or in 2019. It seems there actually are less filings happening in the bankruptcy courts than in previous years. All of this data and a lack of activity in the Bankruptcy Courts makes you scratch your head and ask: What the heck is going on in the bankruptcy courts? For most, this is not a cause for concern.
Unlike most people, I see bankruptcy differently. I believe the bankruptcy courts are the great equalizer. I believe in bankruptcy to get the bad money out of society, and it gets individuals out from under their debts that lets the good money circulate the way it supposed to. Bankruptcy allows the honest, but unfortunate, debtor to get a fresh start and slowly drift back in to the world economy.
The problem that I see right now is that people are carrying around way too much debt again, and if we see an economic reversal, it will be 2008, 2009, in 2010 all over again. Trust me, I never want to see those years ever again, and we won’t. It will be similar but different, but I guarantee it will be catastrophic to the United States economy.
As I write this, there are global financial crash fears which are rippling through the Internet. They may be rumors, and then again, they may be true. No one really knows for sure. But, I do know for sure that food prices have gone up dramatically. The cost of beef and chicken has skyrocketed. Costs for eggs and baby food has gone up exponentially, and why the hell is there a cat food shortage? Where does this all end up for the consumer who lives on fixed earnings? I don’t know, but all I can say is that there is going to be hell to pay.
When supply chains are disrupted and businesses start to realize that the cost of goods that they are selling to the public are going up, those additional costs will always get passed on to the consumer. So, the already stretched tight, fixed income consumer winds up paying more of their after-tax dollars for everything. This leaves less money at the end of the month to pay the revolving debt.
This is clearly a recipe for disaster.