This article was written by Michael Snyder and originally published at the Economic Collapse blog.
Editor’s Comment: The pressure upon the system is enormous; lots of good people can’t handle it anymore. Squeezing financial obligations are forcing many consumers, and now commercial businesses, to fold with no way to pay back what they owe. A backlog of mounting debt that has accumulated collectively for years and years is now taking its toll. Things can only be shuffled for so long before a new string of failures tests the resilience of the system… which will be severely lacking.
A very bad cycle could begin – the debt super cycle, which the big banks have warned will be fatal to our economy, and trigger something at least on the scale of 2008, but likely much larger, and more destructive. Keep watch of how things unfold from here…
Debt Apocalypse Beckons As U.S. Consumer Bankruptcies Do Something They Haven’t Done In Almost 7 Years
by Michael Snyder
When debt grows much faster than GDP for an extended period of time, it is inevitable that a good portion of that debt will start to go bad at some point. We witnessed a perfect example of this in 2008, and now it is starting to happen again. Commercial bankruptcies have been rising on a year-over-year basis since late 2015, and this is something that I have written about previously, but now consumer bankruptcies are also increasing. In fact, we have just witnessed U.S. consumer bankruptcies do something that they haven’t done in nearly 7 years. The following comes from Wolf Richter…
US bankruptcy filings by consumers rose 5.4% in January, compared to January last year, to 52,421 according to the American Bankruptcy Institute. In December, they’d already risen 4.5% from a year earlier. This was the first time that consumer bankruptcies increased back-to-back since 2010.
However, business bankruptcies began to surge in November 2015 and continued surging on a year-over-year basis in 2016, to reach a full-year total of 37,823 filings, up 26% from the prior year and the highest since 2014.
Of course consumer bankruptcies are still much lower than they were during the last financial crisis, but what this could mean is that we have reached a turning point.
For years, the Federal Reserve has been encouraging reckless borrowing and spending by pushing interest rates to ultra-low levels. Unfortunately, this created an absolutely enormous debt bubble, and now that debt bubble is beginning to burst. Here is more from Wolf Richter…
The dizzying borrowing by consumers and businesses that the Fed with its ultra-low interest rates and in its infinite wisdom has purposefully encouraged to fuel economic growth, if any, and to inflate asset prices, has caused debt to pile up. That debt is now eating up cash flows needed for other things, and this is causing pressures, just when interest rates have begun to rise, which will make refinancing this debt more expensive and, for a rising number of consumers and businesses, impossible. And so, the legacy of this binge will haunt the economy – and creditors – for years to come.
Despite all of the economic optimism that is out there right now, the truth is that U.S. consumers are tapped out.
If the U.S. economy truly was doing great, major retailers would not be closing hundreds of stores. Sears, Macy’s and a whole host of other big retailers are closing stores because those stores are losing money. It truly is a “retail apocalypse“, and this trend is not going to turn around until U.S. consumers start to become healthier financially.
We also see signs of trouble in the auto sales numbers. Compared to 2016, sales were way down in January this year…
Compared to January last year, car sales collapsed for all three US automakers, and the largest Japanese automakers didn’t do much better:
- GM -21.1%
- Ford -17.5%
- Fiat Chrysler -35.8%
- Toyota -19.9%
- Honda -10.7%
- Nissan -9.0%
For all automakers combined, car sales sagged 12.2% from a year ago.
A lot of attention is given to our 20 trillion dollar national debt, and rightly so, but a similar amount of attention should be paid to the fact that U.S. households are collectively more than 12 trillion dollars in debt.
About two-thirds of the nation is essentially living paycheck to paycheck. Most families really struggle to pay the bills from month to month, and all it would take is a major event such as a job loss or a significant illness to plunge them into financial oblivion.
In America today we are told that the secret to success is a college education, but most young Americans have to go deep into debt to afford such an education.
As a result, most college graduates start out life in the “real world” with a mountain of debt. And since many of them never find the “good jobs” that they were promised, repayment of that debt becomes a very big issue. In fact, the Wall Street Journal has discovered that student loan repayment rates are much worse than we were being told…
Last Friday, the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers.
When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country.
The new analysis shows that at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.
If you do find yourself deep in debt, a lot of families have found success by following a plan that was pioneered by author Dave Ramsey. His “Debt Snowball Plan” really works, but you have to be committed to it.
Getting out of debt can be tremendously freeing. So many people spend so many sleepless nights consumed by financial stress, but it doesn’t have to be that way.
Most of us have had to go into debt for some reason or another, and not all debt is bad debt. For example, very few of us would be able to own a home without getting a mortgage, and usually mortgages come with very low interest rates these days.
But other forms of debt (such as credit card debt or payday loans) can be financially crippling. When it comes to eliminating debt, it is often a really good idea to start with the most toxic forms of debt first.
It has been said that the borrower is the servant of the lender, and you don’t want to spend the best years of your life making somebody else rich.
Whether economic conditions turn out to be good or bad in 2017, the truth is that each one of us should be trying to do what we can to get out of debt.
Unfortunately, a lot of people never seem to learn from the past, and I have a feeling that both consumer and commercial bankruptcies will continue to rise throughout the rest of this year.
This article was written by Michael Snyder and originally published at the Economic Collapse blog.
This whole thing was set up for the last 8 years to make the next Prez. Look Like Shit!
”Hope and Change”
Yes We Can!
Got your Gold and Silver?? The Train already left the station. Nice run up today.. Silver now at $17.70
We will be in the $18 Range this week.
Dave Ramsey has a nice marketing plan, but it is Old school advice he gives, and leaves out up to date real life financial reality. He never understands Credit Cards and how to use them to your benefit, like when renting a car with a CC and use the card’s Insurance instead of buying the rental car company insurance. He only uses Cash a Debt Card out in public, which can be easily hacked. Moron!!! Ramsey refuses to talk about the US Dollar crashing. Calls Cash King.. He just doesn’t get it, or understand it and why Gold and Silver needs to be in your portfolio and be out of Cash, as the US Dollars is self destructing and worth less and less daily.
Ramsey is about 10 years behind on his economic knowledge and advice. I want to call into his show and slap him around, for being an idiot giving bad advice to ignorant people. He is only about 75% correct in his economic advice. Arrogant dipstick whimpy smartass.
Then these dopes call in for their debt free scream, and Ramsey asks “how much did you pay off?” and they say, $40,000. Ramsey says good, and what is your annual household income? The guy on the phone says he and his wife bring in $140,000 annually. Like WTF, anybody could pay off $40K debt in a year with a $140,000 income. Its phony.
Ramsey also thinks everybody should be driving around in a POS broken down clunker. Again MORON. Many people need dependable cars to get to work, you keep missing work for a broken down car and you will be out of a job.
Ramsey also tells people to only take out 15 year mortgages. That’s BS. You loose a job or a hiccup in income, and you miss that higher 15 year Mtg, you are screwed. I suggest you take out a 30 Year Mtg and double up on the principal payments when you can. You have a problem with income one month, then you only pay the 30 year payment that month. It gives you more flexibility. Ramsey thinks everybody is as rich as him. Kind of like Mittins Romney who said, “Just go start a business, go borrow a Million Dollars from your parents and get it started.”
How many people have parents with a Million Dollars to lend you? You should have heard the belittling I got one time asking to borrow $10 Bucks for gas from my dad. You would think I was borrowing a Million dollars. He died like 18 yrs ago. I guess he grew up poor and never got handed anything, so nobody else should get help either. I’ve been self employed and self sustaining, now 25 yrs. So maybe I did learn something, mostly on my own.
Zeus, I agree about Ramsey. Many young people get into trouble with credit cards. I agree about using a credit card, especially the chip and pin cards, as you have more protection against fraud than with a debit card. I like PayPal for the same reason, the consumer is protected.
Why doesn’t Ramsey teach people how to use OPM (other people’s money) in a responsible way? I like the rewards I get when I shop with my credit card!
As for driving a used car, I agree. I finally bought a new car after having my last car for 10 years (which I also bought new). Being stuck on the side of the road or having to deal with mechanical problems is not my idea of spending my time and money in a smart way.
About having a 15-year vs. a 30-year mortgage. I went with a 30-year mortgage but I always overpay and add an extra $500 a month to principle. If something comes up and I need that money I can easily adjust my payment to cover other expenses without having to be afraid that I can’t make my mortgage payment. That $500 a month cushion is peace of mind. I like watching the faster decrease in my principle balance each month too! That keeps me motivated.
Another thing about using credit responsible is to pay off the balance each month. I do this because I can’t stand paying interest!
I have to say that people ought to teach their children how to save money from a young age. By saving I mean saving real money and paying yourself first.
Lastly, the main thing that always bothered me about Ramsey is he never talks about PMs. I have both silver and gold bullion. Helps me sleep at night.
DP, welcome aboard. Your plan does depend on 1 having enough annual income to qualify for credit and 2. finding someone to let you have access to credit in the first place. All types of credit have always been off limits to me because my income is too low to qualify for it. So most of my transactions or either cash or debit cards only. not even my bank will let me have a credit card. They are impossible to get. Same with financing a car. I go to a private owner for cash because that is my only option. So be it. I live without credit because I have no other choice.
Zeus, you have a damn good insight about credit cards but I have to disagree about it being smarter to use than cash or a debit card. Plus, you also know that A PERSON’S LEVEL OF ANNUAL INCOME is a part of the criteria in every credit policy out there. My income level has always been too low to ever qualify for a credit card or any type of loan. That’s a barrier I’ll never overcome. There’s only a small percentage of people in my company who have credit cards; the vast majority are in the same boat I’m in. So yeah, I’ve always bought cars that were on ‘life support’ with cash from private owners BECAUSE IT WAS THE ONLY OPTION I EVER HAD AS FAR AS TRANSPORTATION IS CONCERNED. I CAN ONLY DO WHAT MY CIRCUMSTANCES ALLOW ME TO DO. LOL! Zeus, actually I’ve heard worse from other people in the past about me not using credit and I’ve told them all to go home to their ivory towers with that shit, LOL!
I order online for herbs, vitamins, and stockpiling when great buys are presented.
So, I love my CC..when the statement is received, the bill is paid in full and I still get bonus points I use at Amazon OR Lowe’s.
CC are awesome if one is responsible–use them; don’t let them use you!!!
****I suggest you take out a 30 Year Mtg and double up on the principal payments when you can****
If you must default on your mortgage–the company does NOT give a s**t what you paid extra..they will hold that against you.(been there, done that and told this from a mortgage officer)
Note to self–take the extra you intend to pay each month, save it in a hidden space, and when you can’t pay that mortgage, pull from that.
Now, IF you have 12 months mortgage saved, THEN, and only then, pay on the principal.
You’ll always have 12 months saved if needed.
taking the 30 year mortgage is the way to go, BUT IF you wish to save THOUSANDS, then you caculate what the payment would have been IF you had a 15 year mortgage, it will cut money and many YEARS from your mortgage so IF you have a financial issue then just pay your normal 30 year payment and then start back up when the problem is over. not smart to pay a 30 year mortgage. if you can barely make a 30 tear payment then you might wish to rethink buying a house. in todays society there is NO security anymore!!
My advice is for those scraping by and would rather buy than rent.
Save every penny you can for mortgage when s**t hits you.
Zeus, how much do you think silver will be worth by say ummm July? $26.50 maybe? Tell me whatcha think big guy.
I say let’s find a nice picture of a woman named Hope, put her picture on,, say the 100 dollar bill and charge “Hope and change” for everything!
Wonder how long the currency of “Hope and change” will last!!! LOL
my parts guy sent me a envelope a while back with a few pennies in it and it said “here’s your hope and change”….i STILL laugh when i think about it….it’s all we got LEFT…..
I think the next Prez is doing a GREAT job looking like shit without any help. HUUUGE, BIGLY steaming pile of orange stained fecal matter.
Dale, this wasn’t set up for the past 8 years to make the next president look bad, they thought the next president was gonna be Hillary Clinton. It was set up to meld with globalism.
Go to Gun Broker look up 10/22 drums. There are 27 days left on 50 rd. Pro-Mag drums for $25.00 a piece. I just bought 3 of them and might get some more.
Do they make a drum for the Marlin 795?
I prefer this little rifle due to price and accuracy.
Yes they do. I don’t know what the cost for sure. I will look it up. Found some at Wholesale Hunter for 61.00, 55 Rd. 35.00 for a 30rd drum.
Sarge, will do, as soon as I build the bank account back up, LOL!
I would like to see this data presented again once filings for student loan bankruptcies are removed. (Yes, you can discharge student loans with bankruptcy, using the undue hardship clauses)
Without Hillary, there is not a chance for student loan forgiveness, as she campaigned on.
people need to quit taking out “student loans” and allow that debt monster to fail ..
but no , people keep feeding it their life savings .. for life
I say it that way , because most of these people are in debt for most if not all of their lives
Its only when that monster quits getting paid , will shit get back to the costs it should be
hell the administration for most of these colleges is larger than the student body.. unsustainable
Let’s keep sending the kids to college for degrees for jobs that don’t exist.
In fact, let’s double down and make it “free” and send everyone that wants to go to university, to university.
Common sense is so rare it ought to be a superpower.
Lets stop making student loans for degrees in subjects that don’t have enough economic value to ever be able to pay them off.
Someone wants a stupid and worthless degree, let them finance it themselves.
i disagree, anon, the stupid SHOULD be made to pay for their mistakes.
My thought on college degrees is that a college education or post-secondary technical/vocational training should be free to anyone who wants it because people have the right to expect something tangible for themselves and/or their children in return for federal and state income taxes coming out of their pocket every week.
The current system, complete with securitized student loans, has done two things: inflate the sticker price into the stratosphere and inflate even more the egos of those “employed” in academia. These people are paid a king’s ransom, along with being ordained as divinely infallible, once they attain tenure and get their works published in academic journals. Think about it logically: exactly what have those “employed” in academia produced in greater quantities that justifies the inflated overhead and salary costs reflected by student loans? Little to, more than likely, nothing. That says that the product they put on the table is more than paid for by your tax money, and you shouldn’t have to take one extra nickel out of your pocket.
How do you short-circuit an academic? First, walk up to him and ask to smell his breath. If he asks why, tell him you’ve always wondered what George Soros’ asshole smelled like.
some day university education WILL be free….and online….and it aint that far away.
If they don’t pay the student loans the degree should be annuled.
When the Governments gets into the business of guaranteeing College Loans the cost skyrockets and the banks could care less if the borrowers default because the US Tax payers bails the borrower out to the Banks. That BS.
The US Government needs to stop Guaranteeing student loans and watch college tuition costs drop back down to $2500 a Semester. Total college 4 year degree should ever exceed $20K. They need to set a limit CAP on a 4 year tuition costs. Unless you are in some medical school or specialized. its a rip off for a basic business degree. Why should school books cost $150 when they really only cost about $10. College today is a scam.
Zeus, I agree about college. Let me add that’s where people go to learn how to be libturds. At the end of 4 years, they can go to McDonald’s, Papa John’s, etc. to pay off the $100,000 or more student loan. College is one of the biggest scams ever and they don’t teach anything useful anymore.
EOTS, spot on. And all the parents get for the money spent is a totally brainwashed kid/kids turned into socialist shitheads.
It pains me to say it. Fiscally, this country is about to fall flat on it’s ass, once again.
Was just watching that financial channel on tv. One of the head mucky mucks of some
hedge fund said we won’t be heading into a recession until almost 2019. I’d like to know
what world he is living in. If you look around, you can see it sucks ass everywhere right now. I’m still seeing the same shuttered businesses and empty storefronts since 2008.
The cost of living is outrageous and most people are just treading water. We are in a
borderline recession/depression. Probably on the cusp of a huge war as well. Wake up all
the sheeple. Its gonna get ugly.
Joey, it’s the same way in my area. all kinds of empty commercial space available in my area. More bums out on the streets than there used to be. more average workers either walking to work or riding the bus because they’re not paid enough money to afford a car. The way cars are priced now you almost have to have a middle-class level income to get one.
You are more right about than you think. I just got back from a short trip Texas to Western Colorado. On the drive up and back my wife and I couldn’t help but notice that when driving through all of the towns on Hwy 87 how many buildings were empty. Either out of business signs on the door, or simply up for lease. In some cases 70% to 80% vacant. Stunning. Property taxes and government regs have killed off the small guys. You are also right about the war machine on the way. Historically the cure all for our financial woes.
Few people today seem to grasp why we have run up huge amounts of public and private debt. The answer is we have to keep borrowing to keep our socialist system alive. Government will continue borrow because they have run out of tax payers (so we add immigrants) and taxes to pay for socialism.
Government has destroyed capitalism and created crony capitalism in its place. Crony capitalism has been thriving on cheap labor from illegal immigrants. This in turn has destroyed the once high paying jobs associated with industry and commerce.
With high paying jobs gone people are piling into personal debt to make up for the loss of high paying jobs. Many people are still trying to live like they are in the middle class with the addition of this debt.
People in a panic over the loss of high paying jobs have turned to borrowing on the student debt to get an education to find that high paying job. When most graduate they find there are no high paying jobs as they were promised.
So until the socialist juggernaut either collapses or is reformed by Trump there will be no high paying jobs to pay down the private debt and provide increased tax revenue to pay for minimal social programs.
Then there is the risk we all keep reading about that the whole world debt system collapses…
WAIT!….WHAT?…..when interest rates go back above 4%, we can’t service our national debt anymore?….whhaaaaaat?…..could that BE?
we are SOOOOO screwed!
If you listen closely you can hear the faint whistle of the incomeing shell before its too late thus giving you opportunity to take cover. Unfortunately the sheeple have their heads up their asses and are unable to hear the whistle sound and when its too late they will be explodded. Whats up with this meteor thats gonna hit feb 16 or 25th and cause a tsunami or something? Will this mean i wont have to pay taxes anymore
there’s ALWAYS a meteor going to hit U.S…..but the DEBT BOMB is a CERTAINTY….that one can’t be avoided…..wish i knew WHEN.
BCOD, the US will end up defaulting on that debt. Won’t have a choice. No way it can be repaid.
I took the patriots for a sb bet and won 100 rds 762×39 and a wopper meal from burgerking .
Many people go to college in order to get a job that pays well. Others get a degree in business in order to start a business of their own. In the meantime Joe comes here at age eight from a Country where workers are paid little to nothing. Joe goes to school long enough to learn to read and write, add, subtract, multiply, and maybe fractions and division. He also picks up three languages, Spanish, English, plus one more, in addition to his Native tongue. Pretty smart guy. Does he waste time in college. Nope. After Highschool he gets a high paying job doing manual labor for a company that pays well. He uses the money to remodel his parents house. Then he buys a house while still living at home. It is a big older home with a solid foundation. He buys it cheap. It looks not so good until Joe gets his brothers and they start working. Now that the house is ship shape and twice as big, Joe gets a second job in the evening wearing a suit. He looks spiffy and is very successful as a salesman in the evening.
Since he now owns the house outright, Joe gets married and starts having kids. He has a friend who works with iron. They decide to open a business making iron fences and such. They make a ton of doe. So Joe buys a Truck for long haul trucking. He really likes it. Joe is mechanically inclined. He’s been fixing cars since he was a kid. Now he’s fixing trucks. With his money, he buys more trucks and some income property. He’s got several businesses going.
Then he gets interested in planes. He starts to learn how to fix them. So now he’s an airline mechanic. The last I heard, somebody wanted him to work on a rocket.
__ based on a true story
Explain how this person went from fixing airplanes to working for a airline without getting a FAA Airframe and PowerPlant License!!!!!
A couple of weeks ago, Bloomberg reported that Trump was being handed a “Vibrant & fully recovered economy.” Apparently, they don’t get out much. Have a woman friend that is working three jobs. I continually get guys coming by & dropping their phone numbers for any work I might have. Other friends bought huge houses before the ’08 crash, lost half of their investments & still have the payment, They are out looking for part time work. Some retired friends are moving back in with their children. It’s never going to get any better.
OT Why weren’t 20 past hall of fame white athletes from predominately white schools not honored along with the 20 blacks? Is it because the whites aren’t allowed a history month? The NFL “Black Race First” pregame sham-show made me sick!! SHAME ON YOU NFL!!
what do michael jackson and richard pryor have in common? they both contributed to the IGNITED negro fund.
Yeah Bert then the Mostly White Patriots team kicked the Atlanta mostly Black teams ass. So what did we learn from that? Don’t send a Boy in, to do a Mans Job.
Zeus, the BOYS on the Atlanta team must’ve been on meth, LOL!
NFL is just like the fed gov. they don’t treat everyone the same.
The current monetary situation is nothing to worry about. The FED will have to create an excess of $125 trillion in the system by the year 2060, so the plan is to hyper-inflate this current $20T away, just like they hyper-inflated the 1985 $2T amount away. The sky isn’t going to fall and the system won’t collapse, the system is just going to get 5 times bigger in the next 40 years, just like it has during the past 25 years. Since the central banksters control the interest rates it just doesn’t matter how much they print into the system. DOW 500,000 baby by 2060.
AND the only thing that will stop this monetary expansion is a world war, alien invasion, worldwide crop failures, meteor/comet extinction event, virus epidemic, an act of god or Mother Nature. Otherwise this is an endless debt expansionary party!! Sit back and enjoy the wealth creation brought to you by Endless Debt, where the principle will never have to be repaid and the interest only payments sent to the central reserve banks is created out of thin air – – – till the end of time.
math is LAW….and just like gravity, it can’t be dicked with FOREVER.
Massa aint makin nuff money on debt cuz too many defaults on dem loans an nobody buyin stuff no mo so massa do what a Nword say do.
Go to war. Well diggity damn …. same old shit different smell.
Where there is stink there is shit and you be steppin in it yo.
Times are so bad people are sellin lemon ices along side the road. People sayin it dont taste like lemonade.
Maybe we can eat chocolate ice cream and be happy.
Ya know what I’m sayin ??
musta bin poopy-pee ice.
And watch dat eye scream…taint chocolit.
We are debt free.Never had a credit card. Never a car payment. bought one parcel of land on payments. All the rest including the place where we now live paid cash. and have pretty much insulated ourselves from the rat race economy. We had deer tenderloin steak tonite . Let it all go to shit I could care less. Just leave me and mine alone.