Americans are currently beset by record levels of debt, and their financial burden could further increase thanks to rising interest rates, inflationary prices and the looming end of the student loan moratorium.
Total household debt climbed to a new high in the second quarter of 2023, reaching $17.06 trillion, with credit card debt exceeding $1 trillion, according to the Federal Reserve Bank of New York. As interest rates stay high, costs continue to rise for expenses like housing and cars, and student loan payments resume, the amount of debt may rise, according to economists who spoke to the Daily Caller News Foundation.
“The amount of debt outstanding, and in particular the surpassing of the $1 trillion mark, is significant and worrisome,” Peter Earle, an economist at the American Institute for Economic Research, told the DCNF. “It owes to a combination of several factors. The initial response to the pandemic, which prominently included the Fed setting policy (interest) rates at essentially zero for several years, made the amount of credit and the price of taking on debt extraordinarily cheap.”
Interest rates for all credit lines are facing upward pressure following the Federal Reserve hiking the federal funds rate eleven times since March 2022, bringing the current rate to a range of 5.25% and 5.50%. Rates were hiked in an effort to combat inflation, which remained elevated in July at 3.2%, ticking up from 3.0% in June but down from 9.2% in June 2022.
“Interest rates on credit cards, car loans, mortgages, and other forms of debt have been shooting up, making the servicing of debt taken at low prices more expensive presently,” Earle told the DCNF.
This pressure could worsen if the Fed decides to raise its federal funds rate once again, with Federal Reserve chair Jerome Powell hinting at the Jackson Hole Economic Symposium that rates will be raised if market conditions do not soften.
“Record levels of outstanding credit card debt is concerning, especially in a time of rising interest rates,” Michael Faulkender, chief economist and senior advisor for the Center for American Prosperity, told the DCNF. “Overall debt burdens for many households are manageable because they locked in record low mortgage rates in 2020 and 2021.”
Future inflation could continue to worsen the debt situation if real wages fail to keep up, increasing real costs for American consumers and thereby putting Americans further into to debt to pay for basic goods. Powell predicted, following the July Federal Open Market Committee Meeting, that inflation would not return to the normal level of 2% until 2025, even with the high interest rates.
“For younger households facing rising rent, restart of student loan payments, and rising credit card debt burden, they are struggling,” Faulkender told the DCNF. “This is exacerbated by the fact that wages have not kept up with inflation and many households are burning through the savings they accumulated during the pandemic. For these households, Bidenomics is a complete bust.”
.@TuckerCarlson and I discuss how half of all Americans live paycheck to paycheck and U.S. credit card debt hits a record $1 trillion. Too many people in this country feel they have been completely abandoned by both parties. It's time to fix this. #Kennedy24 pic.twitter.com/eeFwjpsaUT
— Robert F. Kennedy Jr (@RobertKennedyJr) August 27, 2023
The total balance for student loans fell in the second quarter of 2023 by $35 billion, coming down to $1.57 trillion, according to the New York Fed. The decrease follows a more than three-year hold on payments issued during the COVID-19 pandemic, with interest on balances resuming in September and payments resuming in October, meaning younger Americans could face increased expenditures and an inability to pay off their debts unless personal spending or saving is reduced.
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“The return of student loan payments will have a profound impact on many Americans,” Earle told the DCNF. “With one trillion in debt out there and having not had to pay for over three years, tens of millions of Americans will suddenly have to come up with what amounts to another car payment each month. I suspect the effect upon US consumption will be profound.”
Auto loan balances increased by $20 billion for the second quarter of 2023, bringing the volume of newly originated auto loans to $179 billion, according to the New York Fed. Prices have risen for new cars, with only one new model released in 2023 selling for less than $20,000, as opposed to a dozen new models five years ago, with 60-plus-day delinquencies on prime auto loans rising from 0.41% to 0.49% over the course of a year ending in June and sub-prime delinquencies rising from 4.89% to 5.37% over that same period.
“The statistics on auto loan delinquencies are surprising, as they are not only rising but already above pre-Covid levels,” Earle told the DCNF. “And many of those people are facing the return of monthly student loan payments in 30 to 60 days. Add to that persistently high shelter costs and the recent spike up in gasoline prices, and it’s clear that going into September 2023, things are beginning to get tight for the average U.S. consumer.”
Mortgage rates have recently surged to a 20-year high, with interest rates for a 30-year fixed-rate mortgage peaking at 7.23% in August but coming down to 7.18% by the end of the month, according to mortgage giant Freddie Mac. Following the high rates, Americans are opting not to buy homes, with only 4,160,000 existing homes being sold for the month of June, which is far lower than the consistent 6 million existing homes sold per month in 2021.
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The economy has had a series of negative indicators recently, with yearly real Gross Domestic Product being revised down for the second quarter and job gains cooling, meaning the Fed may not raise the federal funds rate in September, halting the speed at which interest rates are rising and providing some relief to Americans with debts.
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Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
