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July 06, 2022
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Can an Economy Fueled by Massive Debt Survive?

U.S. Debt Bomb
Can an Economy Fueled by Massive Debt Survive?

It’s long been a question in our minds as to how America can survive long-term when the entire financial system is driven by debt. After the Federal Reserve’s creation of $5 Trillion new dollars were injected into the pandemic starved, consumer-based U.S. economy, we then began to see debt as creating an inescapable downward spiral of debt. The chart above shows only a partial view of our national debt incurred by the Federal government.

But, the rampant accumulation of personal debt is also a serious problem. The excellent website VisualCapitalist.Com has provided the following graphic to the Austin Report with data supplied by the Federal Reserve.

The Briefing

  • U.S. household debt stands at $14.56 trillion, and has doubled since 2003
  • Student loan debt has expanded a colossal 550% in the same time frame

The State of Household Debt in America

American households are becoming increasingly indebted.

In 2003, total household debt was $7.23 trillion, but that figure has recently doubled to $14.56 trillion in 2020. With just under 130 million households in the country, this equates to an average of $118,000 of debt per household.

Here’s how the various forms of U.S. household debt compare.

Type of Debt 2003 (in trillions) 2020 (in trillions) % Growth
Mortgage $4.94 $10.04 +103%
Home Equity Revolving $0.24 $0.35 +45%
Auto Loan $0.64 $1.37 +137%
Credit Card $0.69 $0.82 +18%
Student Loan $0.24 $1.56 +550%
Other $0.48 $0.42 -12%
Total $7.23 $14.46 100%

An economy based on borrowing and spending followed by massive injections of Federal borrowing and spending is bound to end up with inflation which is the sole answer to how we repay the debt.

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