Non-mortgage household debt consists of student loans, credit card loans, and auto loans, in which in the fourth quarter of 2008, as reported by the newyorkfed.org the aggregate total was $2.71 trillion dollars, and after that peak, it trended down for only about two and a half years, before beginning its trend back up, and thereby surpassing its previous high indebtedness point in the fourth quarter of 2012, and currently resides at $3.76 trillion dollars as of the third quarter of 2017. This is an increase from the fourth quarter of 2008 to the third quarter of 2017, of 38.75%, and would imply, in fact, would more than imply, that the so-called economic recovery is significantly built upon a wall of debt.
That is to say, when people buy things, they can buy such through cash, or through cash-like instruments such as checks or debit cards, in which, those that are buying within their means, and thereby incurring no debt, are self-sustaining, and those that use debt such as credit cards, auto loans, or student loans, while being able to purchase those things are also subjecting themselves to having to pay back not only the full amount of what they have purchased, but also are subject to interest rate fees, in addition to monetary penalties for failing to make their payments on time or to meet minimum payment requirements.
This then means that there are businesses that profit directly from the indebtedness of the American public, most notably, banks or the equivalencies of banking institutions such as credit unions or other financial entities. These banks or banking institutions are very sophisticated and extremely knowledgeable about how to transact business so that they will be able to make money from the consumers of their products, in good times or bad.
For instance, student loans as reported by bankrate.com, are typically actually sold outright so that: “Six out of every 10 student loan dollars are now made with federal money instead of with private capital.” The advantage of the corporate entity selling the loan is rather obvious, which is that they can make their money on the issuance of such a loan and then go back and loan some more, with the burden of the responsibility of that loan being paid back, actually being transferred to the federal government or other governmental agencies. When it comes to auto loans, the advantage that any lender of such has, is that within the terms of their contract with the consumer, vehicles are collateralized instruments, signifying that the true owner of the asset can penalize the borrower for failure to adhere to the terms of the contract, making such subject to penalties, fees, and repossession of the vehicle, and though the sellers of such, do not actually want the vehicle back, having that option, makes it easier to originate the loan in the first place. In regards to credit card debt, the consumer of this is often clueless about how favorable the terms are to the actual lender, for the lender can raise interest rates up to the peak rate allowed by law for these loan rates are predominantly variable. So too, when the prime rate increases, the interest charge for those carrying a balance will also increase, and finally the usage and the credit limit of a given credit card, is solely at the discretion of that credit card issuer and not of the consumer, so that consumer credit card limits can be slashed drastically when banks are concerned about mitigating risk, especially in times of crisis.
All of the above, really seems to be like history rhyming, for before the last financial crisis occurred, the good times were said to be sustainable into the foreseeable future, which is the same song and dance that is currently being sold to the American public, but a closer look, indicates that a lot of the "prosperity " or economic growth that we have today, has actually been built on a troubling wall of debt, and this debt, is even higher than where it was a decade ago, indicating that when the inevitable
delinquencies and defaults come; it's going to look like we have seen this all before, only this time it figures to be even worse.