Total consumer debt broke another record in January, according to the latest report by the Federal Reserve.

Borrowing increased by $17.05 billion in the first month of 2019. The increase pushed overall consumer borrowing to a new $4.03 trillion record. That compares with $3.84 trillion in January 2018. That represents a 5.1% annual increase.

The consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt.

Revolving credit, which is primarily made up of credit card debt, rose $2.57 billion in January, pushing total American credit card balances to $1.06 trillion.

Nonrevolving credit, including borrowing for auto loans and student loans, was up by $14.47 billion in January. That comes on the heels of a $14.42 billion increase in December.



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This piles on top of total US household debt (including mortgages) that climbed to a record $13.54 trillion in the fourth quarter of 2018. That figure was $869 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008 (right before the crash) and 21.4% above the post-financial-crisis trough reached in the second quarter of 2013.

Mainstream financial analysts spun this as good news. As Bloomberg put it, the data suggests consumers are still willing to borrow, “with activity propelled by the strong labor market, higher wages and tax cuts.”

But this raises a question. If Americans are working, earning more and enjoying the benefits of tax cuts, why are they running up the credit cards? It seems just as likely they are charging it because they can’t make ends meet. And what happens to the US economy when the credit cards get maxed out? At some point, Americans have to pay back all of this debt.

Bloomberg also noted that “the Fed’s patience on raising interest rates may encourage lending.”

Of course, that’s the whole point of loose monetary policy and it helps explain the “Powell Pause.” The Fed simply can’t raise interest rates to anything resembling normal with Americans making payment on over $4 trillion in debt.

The Fed’s monthly consumer credit report does not include data on delinquencies, but the quarterly report revealed Americans are having an increasingly hard time making payments. For instance, the Q4 report said flows into serious delinquency for credit cards rose 5% in Q4, up from 4.8% in the third quarter. Meanwhile, performance in the auto loan sector is “slowly worsening.”

“Growing delinquencies among subprime borrowers are responsible for this deteriorating performance, and younger borrowers are struggling most acutely to afford their auto loans.”



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