http://www.wsws.org/articles/2004/jan2004/debt-j15.shtmlUS consumer debt has reached staggering levels after more than doubling over the past 10 years. According to the most recent figures from the Federal Reserve Board, consumer debt hit $1.98 trillion in October 2003, up from $1.5 trillion three years ago. This figure, representing credit card and car loan debt, but excluding mortgages, translates into approximately $18,700 per US household.
Outstanding consumer credit, including mortgage and other debt, reached $9.3 trillion in April 2003, representing an increase from $7 trillion in January 2000. The total credit card debt alone stands at $735 billion, with the household card debt of those who carry balances estimated to average $12,000.
The levels of consumer debt have increased as millions of jobs have been destroyed. Unlike past recessions, consumers continued to borrow during the last downturn, which began in March 2001 and officially ended in November 2001. The prime lending rate set by the Federal Reserve is at an historic low, allowing mortgage rates to drop to their lowest recorded levels. The automobile companies, which have offered zero percent financing for the past two years, have begun doing the same for 2004.
According to CNNMoney, consumer spending accounts for some 70 percent of the US gross domestic product. “So the world economy is leveraged to the US consumer. And the US consumer is leveraged to the hilt,” states the web site.
Experts warn that the debt bubble potentially dwarfs the US stock market asset bubble that burst in 2000. Consumer credit and mortgage debt represent a higher percentage of disposable income than ever before. Household debt as a percentage of assets reached the historic high of 22.6 percent in the first quarter of 2003. The Federal Reserve revealed that personal savings dropped to a mere 2 percent of after-tax income in the first half of 2003.
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