As we saunter through the pleasantness of 2016, we put more and more distance between ourselves and what was 2008. Consumerism is on the rise and along with it, irrational and irresponsible spending.
According to financial reports, outstanding credit card debt is set to hit the $1 trillion mark in 2016 as banks loosen lending restrictions and push their plastic. Could we surpass the all time high of $1.02 trillion set in 2008 as the Great Recession hit?
It seems this is a distinct possibility. As the job market improves and economic conditions continue to stabilize, consumers are forgetting the lesson in frugality taught by the Great Recession.
Banks are taking advantage of this short term societal memory loss and are continuing to raise credit limits and dole out credit.
Household Credit Card Debt Returning to Form
According to a study by CardHub, a credit card comparison company, Americans paid down $33.8 billion in credit card debt in the first quarter of 2016. Sounds great but that is the lowest debt-pay-down since the first quarter of 2008.
The study also estimates that average household indebtedness should approach $8,500 by the end of 2016. As the chart indicates, this number has been steadily rising and should mimic the figures seen prior to the Great Recession.
The big banks are paying attention. Many banks that retreated from the credit card market after 2008 are back in business with a fury.
Competition is fierce and many banks are offering never-before-seen perks, blindly increasing credit limits and lending to sub-prime borrowers.
Does this sound familiar?
Where is our financial future?
We have read this story before.
When the housing bubble burst eight years ago, the flood was unstoppable. In 2016 we are faced with a different type of crisis.
Student loan debt continues to plague our society with borrowers owing out close to $1.3 trillion in overall student loan debt.
The average 2016 college graduate will have close to $40,000 in student loan debt and as college enrollment increases, so will this number. There is no end in sight to the student loan crisis as lawmakers wade calmly in the shallow end while borrowers drown in the deep.
Combine this with looser lending restrictions, increased spending and societal memory loss and you have a recipe for disaster.
It will be interesting and potentially disturbing to see where this goes and what the financial future has in store.