The good news is, American consumers are feeling confident enough to take on more debt, even as total consumer indebtedness declines:
Auto lending increased by $20 billion in the second quarter from the previous quarter, the largest gain in seven years, Federal Reserve Bank of New York figures showed Wednesday. Americans also increased their credit-card balances, reversing a first-quarter decline, and took out more mortgages.
So far, so good. But there’s less to it than you might think:
At the same time, total consumer debt declined by $78 billion last quarter to $11.15 trillion, putting it 12% lower than its peak in the fall of 2008 during the recession and at its lowest level since 2006.
Most of the adjustment was due to a decline in the amount of debt tied to outstanding home loans, likely due to lenders’ write-offs from foreclosures and recent gains in home prices that helped owners sell.
And yet here we are, taking out more mortgages on homes whose prices have been again artificially inflated by the Fed. Who is going to keep this cycle going, who is going to keep pumping up this bubble, when we’re becoming a part-time nation?
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