Is Debt Becoming the American Dream Again?
Benjamin Franklin once said, “When you run in debt; you give to another power over your liberty.” Debt is often referred to as the money of slaves because it creates obligations and reduces a person’s financial freedom. Going deeper into debt today is commonly used as a method to borrow from the future. Voluntary or not, many people are increasing their chances for a life of servitude.
Debt is making a comeback on Main Street. In the fourth quarter, outstanding household debt increased $241 billion from the previous quarter, representing the biggest quarterly gain in more than six years, according to the Federal Reserve’s latest Household Debt and Credit report. Total household debt, which includes mortgages, student loans, credit cards, and auto loans, reached $11.52 trillion at the end of December, up $180 billion from the prior year.
Households raised their overall debt on a year-over-year basis for the first time since 2008. “This quarter is the first time since before the Great Recession that household debt has increased over its year-ago levels suggesting that after a long period of deleveraging, households are borrowing again,” said Wilbert van der Klaauw, senior vice president and economist at the New York Fed.