Starting in the 1970s, the U.S. government began stupidly helping Big Business convert America into a 70 percent consumption economy.
Which now means: For every $10 of U.S. economic activity, $7 is spending money.
Which means any little economic hiccup – is awful for the U.S. economy.
And explains why anytime there is even a little hiccup, the government response is to firehose money everywhere.
Because the U.S. citizenry absolutely, positively can’t stop spending. Even a little. Ever. Or the whole house of cards collapses.
The United States is now a nation that makes almost nothing. Big Gov helped Big Biz outsource our once-world-dominant manufacturing sector. This was very stupid.
There are a bunch of reasons the U.S. economy has been imploding for decades. This is absolutely one of the biggest.
Long gone is the ability of the single-income-family to be able to afford a middle class life.
Now we have 31 percent of Gen Z who can’t afford to move out of their parents’ house.
Despite all of the idiocies to which we are subjected. Despite all of the evidence to the contrary. We are bizarrely told the U.S. economy is doing great.
We are force fed almost entirely irrelevant economic numbers. To masquerade as evidence of economic success.
Like Gross Domestic Product (GDP). Which is actually irrelevant. It is only relevant – if you measure GDP per capita:
“Per capita gross domestic product (GDP) is a metric that breaks down a country’s economic output per person and is calculated by dividing the GDP of a country by its population.”
Third World California eminently demonstrates the difference:
“California adding millions of poorly educated Third World immigrants has increased its GDP – but greatly retarded its GDP per capita. And thus its economy.”
California is the world’s fifth largest economy. Bigger alone – by no means means better.
Immigration-wise, America has now long gone the way of California. We’ve grown the economy – while making it worse.
The best metric of an economy and the only one that actually matters, is: How are the citizens doing in that economy?
By that metric? The U.S. economy is not good.
The colloquial expression is “getting ahead.” Meaning: Are Americans gaining ground in their lives?
Getting and keeping good jobs that allow them to earn enough money to not just pay for all their life expenses – but to save for future life contingencies.
They are absolutely not “getting ahead.” They are actually free-falling behind.
Record Household Debt: American Households Owe $18.8 Trillion
Well that doesn’t exactly sound like economic health:
“(M)ortgage debt compris(es) 70% of the total.”
That math means about $13.16 trillion. At an average interest rate of 6.6 percent.
And we know what a general disaster the U.S. housing market is.
As mentioned above, nearly one-third of Gen Z can’t even get out of their parents’ houses. Let alone rent a place. Let alone buy a place.
The average age of a first time home buyer is now 40-years-old. A 30-year mortgage means working at least five years past the traditional retirement age. (President Donald Trump’s 50-year mortgage is a ridiculous non-starter.)
And yet another major impediment to home ownership is that hedge funds are buying up entire neighborhoods at a time. With above-asking-price, all-cash offers.
How is the average person supposed to compete with that?
Low mortgage rates have locked up much of the market because those note holders don’t want to sell – and then buy at a much higher rate.
This only further exacerbates the hedge fund problem.
Now, let’s look at some other debts, shall we?
Speaking of houses: If you’re fortunate enough to have one, you are probably borrowing against its equity.
The Home Equity Line of Credit (HELOC) debt stands at $433 billion. With an average interest rate of 7.86 percent, which is 1.1 percent higher than the average mortgage rate.
But there is oh-so-much non-home debt Americans are carrying.
Total credit card debt? $1.28 trillion. Or $6,523 per person. Average interest rate? 20.97 percent.
Total car loan debt? $1.67 trillion. The average new car loan is $43,759. The average used car loan is $28,675. The average loan duration? 70 months – almost seven years. Average loan interest rate? 10.86 percent for new – 11.11 percent for used.
Speaking of Gen Z: Total student loan debt? $1.833 trillion. Average per person? $40,800. Average interest rate? 6.39 percent for undergraduates – 7.94 percent for graduate students.
And then there are the delinquencies and defaults.
4.26 percent of home loans are delinquent. 0.13 percent are in foreclosure (but that number is rising substantially of late).
But as I can attest after my mortgaged house was destroyed by Hurricane Irma? Banks really don’t want a ton of owned houses on their books. They don’t want to be realtors.
Plus with many of the loans placed into Mortgage Backed Securities (MBSs) – it’s difficult to unwind the loans on which they might like to foreclose.
So banks often renegotiate again and again – rather than foreclosing.
The HELOC delinquency rate is 0.82 percent. The default rate is even more minuscule.
All of which proves the old adage: People will forgo paying all their other bills – before not paying on their home.
Speaking of which:
12.3 percent of credit card debts are delinquent. 4.8 percent are in default.
4.8 percent of car loans are delinquent. 8 percent are in default.
25 percent of student loans are delinquent. Default student loans don’t really exist – because federal law makes it nigh impossible to rid oneself of a student loan even by declaring bankruptcy.
Now: After reading all of these debt dollar amounts – and their very many delinquencies and defaults.
If you still think the economy is good. And you still think the GDP is an accurate assessor of the economy.
You really should quit show business.
Seton Motley is the president of Less Government, a DC-based non-profit organization dedicated to reducing the power of government and protecting the First Amendment from governmental assault.
