The warning signs are no longer subtle. More Americans are drowning in debt they can’t pay off, and the latest report from the Philadelphia Federal Reserve makes it crystal clear. The share of credit card holders making only minimum payments has jumped to 10.75%—a level not seen in 12 years.
Then there’s retail sales. January numbers weren’t just bad; they were a disaster. U.S. retail sales fell 0.9% month-over-month, far worse than the 0.2% decline expected. Core retail sales? Down 0.4%, when economists predicted a 0.3% increase. This is the steepest drop since March 2023. What happened? Simple—December saw record-breaking credit card debt as consumers maxed out their borrowing. January was the inevitable hangover.
The reality is, serious credit card delinquencies are now skyrocketing. The percentage of accounts 90+ days overdue has surged to nearly 7%, the highest in 14 years. Young borrowers are in even worse shape, with delinquencies hitting 9-11%, a level not seen since 2009. The American consumer, after running on fumes for over a year, has finally hit the wall.
Between high inflation, job insecurity, and maxed-out credit cards, household finances are starting to resemble the federal government’s debt spiral. Stagflation is no longer a theoretical risk—it’s staring us in the face.
And what is Jay Powell doing? The Fed’s Quantitative Tightening (QT) was supposed to drain liquidity, but thanks to the Treasury General Account (TGA) maneuvers and the Reverse Repo Program (RRP) drawdown, bank reserves haven’t actually dropped. In other words, the liquidity that should’ve been drained out of the system is still sloshing around. No real QT means inflation remains stubborn, while consumer spending collapses—a textbook stagflationary mess.
The American economy has been running on borrowed time. Now, it looks like that time is finally up.
Sources:
https://x.com/zerohedge/status/1890396207870083318
https://x.com/GlobalMktObserv/status/1890394061506265597
https://x.com/GordonJohnson19/status/1890401449936380161
https://finance.yahoo.com/news/u-credit-card-defaults-soar-223837390.html
