According to a very optimistic Wall Street Journal report quoting Barclays, more than 6 million Americans will have a clean slate 5 years from now, when their personal bankruptcies will disappear from the books. Also, US consumers’ credit scores reached a peak this spring, a record high actually, with mainstream economists expecting a tidal wave that will raise all the boats, i.e. an increase in spending and a boost in loan/credit card approvals.
Together with an improving overall credit score, Americans now boast a historic low with regard to the number of the riskiest borrowers, which means excellent news for economic activity in general and lending in particular, at least potentially.
A historic-high consumer credit score translates (usually) into economic growth and falling unemployment numbers. Bankruptcies and foreclosures are also disappearing from Americans’ credit reports in ever growing numbers since the housing meltdown in the aftermath of the 2008-2009 financial crisis.
Six million Americans boasting clean slates (credit scores) will also help a lot with boosting consumers’ credit scores, which are essential for lenders when they try to determine interest rates for an approved consumer loan. Higher consumer scores will clearly lead to more available credit.
Currently, the percent of Americans deemed to be the riskiest (the ones with a FICO score below 600) hit a new low, standing at 20% of US consumers (adults), down from 2010’s 25.5% and October’s 20.5%.
One red-pilled economist may argue that 6 million deadbeats will soon become eligible to buy stuff again, with money they don’t have, and who knows, maybe even from your company. And all these schemes are concocted for creating more debt and thus they’ll cause another bubble to crash and more bail-outs in the future, on the taxpayers’ expense.
As we all know there is a time and place for debt. But debt levels continue to break new records so it looks like the American consumer did not learn from the painful lessons they were taught just a few years back. This is like your neighborhood drug dealer giving away free samples to get back customers who have gone clean.
The inherent structural problems of the international Financial/Banking system were NEVER addressed after 2008. The FED and World’s Central Bankers covered the debt with more EASY money and credit explosion via Quantitative Easing programs and an almost zero interest rate policy (ZIRP).
Now, basically all types of debt ( private, Public, sovereign,Corporate Consumer etc) in the World including USA are at a record level since 2009! For example:
US National DEBT – 20 Trillions and climbing!
Housing bubble – back and over that in 2007!
Consumer Credit including roll over – over 1 trillion.
Net household debt – over 1 trillion.
Student loans – 1.3 Trillion.
Auto credit loans – over 1 trillion.
NY exchange margin debt near record.
The solution? Create more DEBT out of thin air( Fed & central bankers) right?
What could go wrong?
PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS