{"id":3749,"date":"2011-03-08T09:41:33","date_gmt":"2011-03-08T16:41:33","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=3749"},"modified":"2018-09-21T02:07:59","modified_gmt":"2018-09-21T06:07:59","slug":"consumer-debts-are-up-not-necessarily-bad-thing","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/03\/08\/consumer-debts-are-up-not-necessarily-bad-thing\/","title":{"rendered":"Consumer Debts Are Up – Not Necessarily a Bad Thing"},"content":{"rendered":"

Yesterday the Federal Reserve released its January data about consumer debt levels.\u00a0 Growth of 2.5% was logged which puts total consumer debt on pace to hit $2.4 trillion by the end of the year.\u00a0 The breakout for the increased debt levels was interesting to say the least.\u00a0 Non-revolving credit (e.g. loans for autos, boats and education) was up a massive 7.0%.\u00a0 By contrast credit card debt hit a six-year low.<\/span><\/p>\n

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Analysis:<\/strong> I have long decried the level of consumer debt in the United States<\/a>.\u00a0 However, my focus has always been on unnecessary use of debt on the part of consumers.\u00a0 That is, debt used to purchase a flat panel TV, or an iPhone, or an iPad, or non-essential clothes, or a cappuccino machine, or whatever doesn’t actually allow one to live within one’s means.<\/span><\/p>\n

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The type of debt that drives me crazy is credit card debt.\u00a0 With interest rates usually around 18%, credit card debt is the gift that keeps on taking.\u00a0 Ugh!\u00a0 So what debts are legit?\u00a0 It makes sense to take on debt to buy something today that is essential to your ability to earn money.\u00a0 So a house makes sense.\u00a0 Do you really want to save money for 30 years before you are able to buy a house with all of its attendant investment benefits?\u00a0 No.\u00a0 So an education certainly makes sense.\u00a0 Does a car make sense?\u00a0 Yes, to the degree that the car allows you to expand the range of possible jobs available to you.\u00a0 But a car that is simply, purely about luxurious excess, excess that you cannot afford, is a waste of debt.\u00a0 What about a boat?\u00a0 Please.<\/span><\/p>\n

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So with that above list you probably can identify where I stand on the fact that consumer debt levels are up 7%.\u00a0 The list of things that people are spending money on makes sense to me – excepting the boats.\u00a0 During the Great Recession people forestalled purchases of automobiles – now with interest rates very, very low it makes sense to take on a car payment.\u00a0 Education loans almost always make sense as long as the income you earn from that education exceeds the costs of the debt used to purchase that education.<\/span><\/p>\n

 <\/p>\n

In short, I am saying that it seems as if consumers are continuing to make wise spending decisions as we exit the Great Recession.\u00a0 Credit card debt is down.\u00a0 Retail sales are mostly in line with income growth – meaning that people are only spending money they earn and not borrowing via a credit card to make a purchase.\u00a0 I have been monitoring consumer behavior to see if real lessons were learned.\u00a0 The lessons of debt excess taught by the Great Recession seem to have stuck in the consumer consciousness.<\/span><\/p>\n

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Importance grade:<\/strong> 7; more data are needed to really, truly know<\/em> if consumer behavior has changed.\u00a0 What I am waiting for is when the unemployment rate is around 7% and GDP growth is around 4-5%.\u00a0 In the meantime, my intuitive sense tells me that many consumers and their behavior is being driven by anxiousness.\u00a0 But the underlying attitude is: “when will this end?”\u00a0 In other words, there seems to me to be a palpable sense of “when things get better I can go back to the old ways.”<\/span><\/p>\n

 <\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Yesterday the Federal Reserve released its January data about consumer debt levels.\u00a0 Growth of 2.5% was logged which puts total consumer debt on pace to hit $2.4 trillion by the end of the year.\u00a0 The breakout for the increased debt levels was interesting to say the least.\u00a0 Non-revolving credit (e.g. loans for autos, boats and […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-3749","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/3749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=3749"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/3749\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=3749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=3749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=3749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}