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Borrowing by Americans Reaches $13 Trillion

Borrowing by Americans Reaches $13 TrillionBorrowing by Americans Reaches $13 Trillion

Americans owe more than ever before, with household debt hitting a record of nearly $13 trillion. And auto loans, home loans, and credit card debt are all still on the rise, according to the Federal Reserve Bank of New York.

That has some economists saying the lessons of the bubble of borrowing in the run-up to the Great Recession have already been forgotten, npr.org reported.

The last time borrowing hit a record, the country was in the throes of the financial crisis. That might sound ominous. But the economy is in much better shape now. Home loans—by far the biggest debt category—are made to people who can actually afford them. And much of the borrowing is arguably responsible.

Millions of Americans have found work in recent years. And spending money keeps the US economy chugging along. So from that perspective, maybe all this debt isn’t so bad.

On the other hand, some economists don’t like this record borrowing. “The new level of debt is cause for alarm,” says Lucia Dunn, an economist at Ohio State University who’s been studying consumer debt for more than 20 years. Her research shows that only about half of credit card debt gets paid off each month. And so she says rising credit card debt suggests more Americans are getting stuck paying high interest rates.

Sung Won Sohn, an economist at Cal State, also has watched Americans’ relationship with debt for many decades. He says all this borrowing has him worried. “We are beginning to forget the lessons learned from the painful recession in 2007 to 2009,” Sohn says.

Consumer spending is the largest portion of the economy “and when the time comes for an economic recession, this is going to make the situation worse,” he says.

Americans carry about $784 billion in credit card debt and they owe $1.34 trillion on student loans.

 

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