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Inflation is in the Rear-View Mirror

43 percent of credit card holders carry a balance. Delinquencies are rising. It’s a deflationary debt trap.

Revolving Credit Hits New Record High

In December, revolving debt has topped the previous high-water mark of $1.021 trillion set in April of 2008. Debt as of December 2017 (the latest available) is $1.028 trillion.

Relationship Killer

In addition to student loans, credit card debt is another factor holding down home ownership and family formation. Studies show Credit Card Debt is a Relationship Killer.

  • Of all household debts, Americans find credit card debt the most unacceptable in a partner, but credit card balances are creeping higher.
  • About 43 percent off all card holders carry a balance each month according to the American Bankers Association.
  • More than 3 in 4 Americans consider too much card debt a relationship deal breaker, according to personal finance site Finder.com.

Overdue Debt Hits 7-Year High

The Financial Times reports Overdue US Credit Card Debt Hits 7-Year High.

Distressed debt, defined as debt that’s at least three month’s delinquent, totals $11.9 billion. That’s an 11.5% fourth-quarter surge.

​The Financial Times also notes “More Americans are also falling behind on their mortgages, for which problematic debt levels rose 5.2 percent over the same period to $56.7 billion.”

Deflationary Debt Trap Setup

These numbers are huge deflationary. When credit expands there is inflation. When credit contracts (think defaults, bankruptcies, mortgage walk-away events), debt deflation occurs.

Here’s my definition of inflation: An increase in money supply and credit, with credit marked to market.

Deflation is the opposite: A decrease in money supply and credit, with credit marked to market.

Looking Ahead

  • Credit card delinquencies are priced as if they will be paid back. They won’t.

…click on the above link to read the rest of the article…

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