Sunday, July 10, 2011

Americans take on more debt as the economy continues to struggle.

Good news everyone! Even though the official unemployment rate just ticked up to 9.2%- the real number is likely over 15%- and Greece is on fire and now spreading to Italy, and tent cities are emerging on the edge of American population centers, it’s cool because consumers are using their credit cards and taking on more student debt!

On the one hand the linked article makes the point that the increase in student debt is largely a reflection of people trying to wait out the recession in school, and the increase credit card debt is likely a reflection of people using them to make ends meet. On the other hand the article tries to spin this news as a positive for the broader economy. People take on more debt when they feel wealthier, the article says.

Yes, that’s what it is.

Everyone knows this is nonsense.

It’s funny. I was talking to a friend yesterday about the economy and he agreed with me that we now exist in a “wink and nod” economy. Everyone knows it’s bad, but if we all keep our spirits up and just refuse to accept the underlying (and nasty) economic reality we can keep from descending into the quicksand forever. A lot of people are counting on this. Chief among them Chairman Bernanke.

This can go on for a long time. If the Fed can continue to prime the “animal spirits” as it has, it can continue to delay the day of reckoning for a long time. The thing is it can not, I believe, avoid it. In order for us to once again enjoy real growth in the economy markets need to clear.

So this article is par for the course. It’s just one reference point in the slow decent of our economy.

Now who’s up for a spending spree at Neiman Marcus?

Article from the AP.

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Nick Sorrentino is the Editor of The Liberty and Economics Review and CEO of a social media management company.