Are we borrowing our way into trouble?

Jonathan Clements’ column in the Wall Street Journal this week contains some disturbing statistics. In an era where fewer and fewer Americans are protected by good pension plans — when retirement savings should be going up — Americans are running up debts faster than savings.

According to the Federal Reserve, household real estate value climbed by 71% over the past five years, but mortgage debt grew 75% thanks to refinancing and second mortgages.

Outstanding consumer debt (mostly car loans and credit card balances) is up 27% over the past five years, although inflation was up only 13%.

More and people are leasing cars, which means they have no asset in their hands when the lease is over.

In the decade ending 2004-5, annual borrowing for college through student and parent loans jumped 194%, even though total costs of four-year private colleges increased only 66% and state schools were up by 72%.

Clements calls this “..a betrayal of family financial values.” Whether or not it is that, it is certainly cause for concern!

You must be logged in to post a comment.