Are We Heading Towards a Second Financial Crisis? The Environment Is Ripe for One.
There is one thing for sure. The 2008 Financial Crisis might as well not have happened because as severe as it was Americans have not learned their lesson about debt. The Federal Reserve Bank of New York reported this week that consumer debt for the second quarter of 2016 stands at 12.29 trillion dollars. That is an increase of $35 billion dollars from the previous quarter.
The record amount of debt was reached during the height of the Financial Crisis in 2008 at 12.68 trillion. We stand a mere 3.1% away from setting a new record and that is not good.
Debt is the problem and we are aggressively adding it. Let me put this in perspective. A trillion is a million millions and then multiply that by 12.
Credit Card debt is almost at record territory. It should exceed 1 trillion by the end of the year.
Student Loan debt is 1.3 trillion.
Auto loan debt is at record territory and has exceeded 1 trillion.
Capacity is the problem. Consumers have the capacity to add debt and make minimum payments at least until they can’t. Debt has the tendency to get out of control very silently. Then all of the sudden it is a problem.
Toxic mortgage debt kicked off the problem in ’07. Who knows what will kick off the next crisis. However, the environment is ripe for one. During the financial crisis, the price of oil had just crashed, we were at record amounts of debt, the stock market was at all-time highs and there was a historic Presidential election happening.
Bob Brooks is host of the Prudent Money Radio show. Bob is also a financial advisor who helps people set and achieve financial goals. For more information or to set up a phone consultation, email Judy Parrish at firstname.lastname@example.org.