The “trifecta” of national, corporate, and consumer debt has reached all-time highs, and could prove to be catastrophic if a recession hits.
Let’s start by quickly bringing each part of this debt trifecta up to date as much as possible…
U.S. National Debt
The national debt, ever on the rise, currently sits at around $22 trillion:
In just the short decade since 2008, the debt has jumped from $10.6 trillion to $22 trillion. It also comes with a deficit that’s currently over $1 trillion currently. The interest payments alone may be forming a “black hole” from which the U.S. may never escape.
These facts alone should raise concern in any interested observer.
The total amount of corporate debt has never stopped rising since 1950. Corporations have taken on a record level of debt since 2007.
You can see the steady rise in corporate debt liabilities here:
One of the main problems with this type of debt, aside from getting repaid, is that some corporations are using it to buy back shares of stock. Instead of this “sleight of hand,” you’d think that they should be using it to fund growth and create jobs.
But one thing is certain, the piper will need to be paid at some point. When that happens, who knows what can happen to the economy.
Total consumer debt is near $4 trillion, and has been rising steadily since 1975. But it has risen a staggering 47%since 2008, and shows no signs of stopping.
The chart below reveals this economic “ATM” at work:
When interest rates rise, as they have been thanks to the Fed’s recent spat of rate hikes, they will eventually get high enough that consumers won’t be able to get loans, or repay them.
Economic growth requires that consumers buy things and obtain credit. If they can’t do either, the consequences could be dire.
Now, this debt-fueled trifecta has caused panic among some billionaires.
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