Inflation Murdering Young Americans’ Finances

Elvis Dunderhoff August 1, 2022

Previously: We’ve Entered a New Phase of Our Recovery

Inflation was the old phase of our recovery.

The new phase is an officially quantified but non-designated recession.

But the previous phase of our recovery continues to destroy everyone’s life.

Reuters:

As high inflation forces Americans to spend more on gas and bills, young and low-income consumers are starting to feel financial pressure.

Generation Z consumers and those with low credit scores are falling behind on credit card and auto loan bills and accumulating credit card debt at a pace not seen since before the pandemic.

For instance, credit card balances for people ages 25 and younger rose by 30% in the second quarter from a year earlier, compared with an increase of just 11% among the broader population, according to a random sampling of 12.5 million U.S. credit files compiled by credit score company VantageScore. Balances for non-prime borrowers, or people with credit scores below 660, rose by nearly 25% over the same period.

For months, things have been looking good for U.S. consumers, their bank accounts padded by government stimulus, student loan forbearance and pandemic-era savings. Bank executives have consistently said consumers have healthy financial cushions and are spending money despite high inflation and the slowing economy.

Now there are signs that some Americans have overextended their finances from traveling and dining out while paying down less debt on their credit cards, said Silvio Tavares, head of VantageScore. That contrasts with consumers’ tendencies to pay off loans and be more frugal during the first year of the pandemic, according to Fed data.”The consumer is strong, their balance sheets are strong, and their repayment history on debt is strong relative to historical averages,” Tavares said. “However, there are areas of concern. Number one among them is consumers are adding leverage.”Federal Reserve Chairman Jerome Powell has said the clock is running out to bring down inflation, which is hovering at levels not seen since the 1980s.

Data out on Thursday showed U.S. consumer spending grew at its slowest pace in two years, as the economy unexpectedly contracted in the second quarter.

Those surging prices are causing consumers to cut back on discretionary spending, according to retail and consumer companies like Walmart Inc (WMT.N) and Tide-maker Procter & Gamble Co (PG.N), which lowered sales growth forecasts over the past week.

Rapidly accelerating prices could exacerbate financial strains among young people and borrowers with low credit scores, Tavares said. Among non-prime borrowers, the percentage of credit card and auto loans that were more than 30 days past due also rose, VantageScore found. Credit card delinquency rates are now back to their pre-pandemic levels for young people and non-prime borrowers, the data showed.

While the delinquency rates are not yet a cause for concern, “it’s definitely something to watch,” Tavares said.

“You can get a bit of a canary in a coal mine effect. If it happens with one group, sometimes it can spread to another group.”

TransUnion, one of the big three consumer credit ratings agencies, estimates credit card delinquency rates could rise to 8.4% in the first quarter of 2023, up from 8% in the first quarter this year, if inflation remains high.

The average debt held by a non-prime customer was $22,988 in the first quarter of 2022, excluding mortgages, according to TransUnion. That is up from $22,461 a year earlier, and $22,970 in the first quarter of 2020, before the pandemic began in the United States.

It’s all “the pandemic.”

There never actually was a pandemic. But the response to the alleged pandemic resulted in printing more than ten and maybe 15 trillion dollars.

The war against Russia isn’t helping.

Now Nancy Pelosi is threatening to invade Taiwan. She’s backed down, the stupid old bat, but China is still going to punish America for this in some probably severe way that will cost a lot of money and create a lot of problems.

So it’s the death spiral. But there’s a lag on these effects. I remember like, January 2021, someone was like “Anglin are you ever going to apologize for saying there would be an economic collapse as a result of the measures against the coronavirus?”

Niggas be like the blacks. Can’t imagine something would happen and then the consequences of the thing would happen later.

But yeah, these new phases of our recovery are just going to keep getting worse and worse, and eventually everyone will be poor. Except rich people.

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