Are we approaching a new great depression? By all metrics, the US economy is doing well: Inflation is down (but sticky), spending on travel and entertainment is up, and economists are shifting gears from a “soft landing” to “no landing” at all.
The plane hasn’t landed; we’re still flying on with the Fed deciding whether to hike rates, cut them, or pause like a pilot trying to navigate a runway in the dark.
And as much as economic life may “seem to be improving,” sardonic tweets like this one click with me:
What’s going on with the economy? Who are the winners and losers in this new normal?
New Great Depression Loser: Colleges Loan Sharks (Ticking Time Bomb)
When student loans reactivate for many Americans in September (including yours truly), average payments will be around $440.
40{aa99edd08dd66036bd4af6c3dbe8af9b4ab31fcc55a521c2956d094a6dcd3a48} of people are already confirmed not to be able to afford the first payment back with cancellation off the table, and the average American has $6270 in credit card debt.
If many Americans stopped paying their student loans altogether, the economy would be buck-broken in 2008 style.
Honestly, I wouldn’t care about a Republican Supreme Court not wanting to bail out students if they didn’t always capriciously change their tune anytime banks, the auto industry, the airline industry, the luxury cruise industry, etc., needed a bailout and got it almost instantly no questions asked.
New Great Depression Winner: The United States AAA Credit Rating
In 2012, the United States lost its AAA credit rating due to Standard & Poor’s increasing interest rates on US government debt. That was S&P. Last year, it was Fitch. (there is also Moody’s, which still has the US rated as AAA).
It boils down to this:
- Owe trillions in debt with no hope of paying it back
- A slight reduction in credit rating
- The US: “WTF, man? I thought we were friends.”
Unironically, the American credit rating should be around B- by real-world standards. But for decades, the premise was and still is that America can keep printing money forever because we invade anyone who stops using the dollar as a reserve currency, and nobody will stop.
So, really, this news is a nothing burger.
New Great Depression Loser: People Who Have Been Living Paycheck To Paycheck
40 percent of Americans are now in a debt cycle that only ends in default. Read that sentence again.
Here are some not-so-tasty stats:
- Incomes over $150k are maxing out their cards to keep up with inflation.
- 35{aa99edd08dd66036bd4af6c3dbe8af9b4ab31fcc55a521c2956d094a6dcd3a48}of Americans using a credit card believe they will max out at least one of their cards before the end of the year.
- Another 35{aa99edd08dd66036bd4af6c3dbe8af9b4ab31fcc55a521c2956d094a6dcd3a48} of Americans with credit cards admit they won’t be able to fully pay off those card(s) before the end of the year. And it’s not just your average Joe struggling — even the upper-class earners with an annual income above $150,000 can’t pay their debt.
Americans could start to default en masse without relief.
That’s why we at 99Bitcoins do believe Federal Reserve rate cuts will happen in September, but will it be enough?
It will be a bumpy ride as everyone adjusts their view of money and the world.
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