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Debt trap

Total US household debt has risen by $230 billion in Q3 2023, to a new record of $17.29 trillion. It has increased 21% over the last three years. GDP numbers continue to point to the strength of the consumer, even as rates have gone up 525 bps. However the strength seems to be fueled mostly by debt, which is unsustainable. In fact, delinquencies are going up, particularly in auto leases and credit card: 8% of that debt is delinquent already and rising fast. Overall delinquencies are still low compared to prior crises, but consumers are tapping every possible debt source at very high rates, which will accelerate defaults. That’s why unemployment is so important at this point. If consumers lose their income stream, bankruptcies will go vertical.

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Chart Source: Bespoke investment group

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