U.S. Mortgage Debt Hits Record, Eclipsing 2008 Peak, Household Debt Nears $14 Trillion
U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded.
Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008, the Federal Reserve Bank of New York said Tuesday.
Mortgages are the largest component of household debt. Mortgage originations, which include refinancings, increased by $130 billion to $474 billion in the second quarter. The figures are nominal, meaning they aren’t adjusted for inflation.
The milestone for mortgage debt has been long in the making. Americans’ mortgage debt dropped by about 15% from the 2008 peak to the trough in the second quarter of 2013 and has climbed slowly since then.
Total household debt has been on the rise since mid-2013. It rose by 1.4% from the first quarter to $13.86 trillion, the 20th consecutive quarter of increase.
Still, the household debt picture is much different in 2019 than it was 11 years ago, since lending standards are tighter and less debt is delinquent today.
“While nominal mortgage balances are now slightly above the previous peak seen in the third quarter of 2008, mortgage delinquencies and the average credit profile of mortgage borrowers have continued to improve,” said Wilbert van der Klaauw, senior vice president at the New York Fed.
Bankruptcy filings rising across the country and it could get worse
Bankruptcies are back — flashing warnings that more Americans are knee-deep in debt in big cities like New York.
While total bankruptcy petitions nationwide by consumers and businesses are still well below Great Recession levels, analysts say there is an unmistakable trend upward.
New York state’s bankruptcy filings, for instance, have risen steadily the past three years, hitting 34,711 in 2018, up from 30,112 in 2016, according to the American Bankruptcy Institute (ABI), based on data from Epiq Systems.
More consumers nationwide are falling behind on their payments and filing for bankruptcy to resolve overwhelming debt loads. And low unemployment, an uptick in average wages and the latest Fed interest rate cut have not restrained the debt monster. Some cash-strapped consumers are even finding relief at food pantries.
“In high-cost cities like New York, personal incomes are not often enough to pay the household bills,” Zac Hall, vice president of anti-poverty programs at the Food Bank For New York City, told The Post. “We are seeing people using consumer debt as a way to make ends meet when they come here,” he added, citing the pressures his nonprofit faces to keep up the distribution of food and meals at no cost to some 1.5 million New Yorkers.
And unmanageable debt is also forcing more companies to file for bankruptcy, triggering a wave of job cuts — with nearly 43,000 job losses announced in the first seven months of this year, according to a new report by Challenger, Gray & Christmas. It’s almost 20 percent more than all bankruptcy-linked job cuts in 2018. In the latest example, last week Barneys New York said it had filed for Chapter 11 bankruptcy protection.
According to data released last week by the ABI, US bankruptcy filings surged by 3 percent in July 2019 from July 2018. A total of 64,283 filings were reported for July, up from 62,241 for July 2018. And if the trend continues, this year’s overall total of bankruptcies is on pace to hit 796,000, far exceeding the 777,000 for last year.
$3,727,014,000,000: Federal Spending Sets Record Through July; Treasury Runs $866,812,000,000 Deficit
The federal government spent a record $3,727,014,000,000 in the first ten months of fiscal 2019 (October through July), according to the Monthly Treasury Statement released today.
While spending that record $3,727,014,000,000, the government ran a deficit of $866,812,000,000.
Before this year, the most that the federal government had ever spent in the first ten months of a fiscal year was in fiscal 2009, when the Treasury spent $3,576,745,930,000 (in constant June 2019 dollars, adjusted using the Bureau of Labor Statistics inflation calculator).
Federal spending was impacted in fiscal 2009 by the recession that was ongoing when that fiscal year began. At the beginning of fiscal 2009, President George W. Bush signed the Troubled Asset Relief Program to bailout failing banks. Later that fiscal year, President Barack Obama signed the American Recovery and Reinvestment Act, aimed at stimulating the economy.
Total federal revenues in the first ten months of fiscal 2019 equaled $2,860,202,000,000. That was less than the total revenues the federal government collected in the first ten months of fiscal 2017 ($2,866,978,570,000 in constant June 2019 dollars) and fiscal 2015 ($2,868,253,370,000 in constant June 2019 dollars).
Federal individual income tax revenues in the first ten months of fiscal 2019 equaled $1,428,904,000,000. That was less than the individual income taxes the federal government collected ($1,438,381,490,000 in constant June 2019 dollars) in the first ten months of fiscal 2018.
The difference between the $2,860,202,000,000 in total taxes the government collected and the $3,727,014,000,000 that it spent in the October through July period resulted in a deficit of $866,812,000,000.
According to Table 3 in the Monthly Treasury Statement, the Department of Health and Human Services spent the most of any federal agency in the first ten months of fiscal 2019 ($1,005,897,000,000), the Social Security Administration spent the second most ($915,775,000,000), and the Department of Defense-Military Programs spent the third most ($540,435,000,000).
U.S. Budget Deficit Already Exceeds Last Year’s Total Figure
The U.S. fiscal deficit has already exceeded the full-year figure for last year, as spending growth outpaces revenue.
The gap grew to $866.8 billion in the first 10 months of the fiscal year, up 27% from the same period a year earlier, the Treasury Department said in its monthly budget report on Monday. That’s wider than last fiscal year’s shortfall of $779 billion — which was the largest federal deficit since 2012.
So far in the fiscal year that began Oct. 1, a revenue increase of 3% hasn’t kept pace with a 8% rise in spending. While still a modest source of income, tariffs imposed by the Trump administration helped almost double customs duties to $57 billion in the period.
Republican tax cuts, increased federal spending and an aging population have contributed to the fiscal strains, though the GOP says tax reform enacted last year will spur economic growth and lift government revenue. Corporate income-tax receipts rose 3% between October and July, while individual income taxes gained 1%, according to Treasury data.
The annual budget deficit is expected to exceed $1 trillion starting in 2022, the Congressional Budget Office has said. The non-partisan agency is scheduled to update its latest 10-year budget and economic forecasts on Aug. 21.
The Average U.S. Farm Is $1,300,000 In Debt, And Now The Worst Farming Crisis In Modern History Is Upon Us
We haven’t seen anything like this since the Great Depression of the 1930s. Leading up to this year, farm incomes had been trending lower for most of the past decade, and meanwhile farm debt levels have been absolutely exploding. So U.S. farmers were desperate for a really good year, but instead 2019 has been a total disaster. As I have been carefully documenting, due to endless rain and catastrophic flooding millions of acres of prime farmland didn’t get planted at all this year, and the yields on tens of millions of other acres are expected to be way, way below normal. As a result, we are facing the worst farming crisis in modern American history, and this comes at a time when U.S. farms are drowning in more debt than ever before. In fact, the latest numbers that we have show that the average U.S. farm is 1.3 million dollars in debt…
Debt-to-asset ratios are seeing the same squeeze, with more farms moving into a ratio exceeding 80%. Barrett notes each year since 2009 has seen an increase in the average amount of total debt among farmers, and 2017 was no exception. Average debt rose 10% to $1.3 million. The biggest increase was in long-term debt, such as land.
Farming in the 21st century has become an extraordinarily risky business, and countless U.S. farmers were already on the verge of going under even before we got to 2019.
Now that this year has been such a complete and utter disaster, many farms will not be able to operate once we get to 2020.
Minnesota farmers Liz and Bob Krocak were hoping for better days ahead as this year began, but things have been really tough and their debts have become overwhelming. During a recent meeting with their creditors, Liz was so distraught that she literally burst into tears…
They had to face their creditors at a mediation. There was Del, the mechanic, whom they owe $28,000 and who now can’t help his son buy a home. There was Steve, the feed store guy, who is 64 and has delayed his retirement because of the Krocaks’ $311,000 bill.
Liz recalled the mediator opening the meeting by saying, “This is going to be an emotional day. I can see everybody really likes this family.” Liz had burst into tears then – and she was crying again now, describing the scene seven months later.
“We just hope there’s a farm left at the end of it,” she said.
In total, the Krocaks just happen to be 1.3 million dollars in debt.
At this point, there isn’t a prayer that all of that debt will ever be paid off. All they can really hope for is more patience from their creditors, because without it the farm is going under.
The Krocaks recently received a check for about 12,000 dollars from the federal government, and they are very grateful for the money, but the truth is that it isn’t even going to make a dent in their 1.3 million dollar debt.
If the horrific weather and endless flooding wasn’t enough, about a week ago the Chinese government announced that they would be ending all “purchases of U.S. agricultural products”, and that was a devastating blow for farmers all over the nation.
In particular, soybean farmers are going to see demand for their crops absolutely collapse. In recent years, China has purchased approximately 60 percent of all U.S. soybean exports.
And even if a trade deal is eventually reached, it is unlikely that all of that demand is ever going to come back. Right now, the Chinese are spending enormous amounts of money “to build transportation infrastructure to ship soybeans grown in what used to be rain forests” in Brazil. They aren’t going to abandon all of that just because Trump suddenly changes his mind.
And the truth is that it is extremely unlikely that Trump will change his mind and cave in to the Chinese.
So for the foreseeable future, U.S. farmers are going to be facing weaker markets and lower prices, and that is going to be the final straw for many of them.
Have you ever been at a point in your life where you have endured problem after problem and then one day a final crushing blow comes along that takes away the last shred of hope that you were holding on to? That is precisely what has happened to farmers like Bob Kuylen of North Dakota…
“It’s really, really getting bad out here,” said Bob Kuylen, who’s farmed for 35 years in North Dakota.
“Trump is ruining our markets. No one is buying our product no more, and we have no markets no more.”
We keep hearing about “government bailouts”, but they aren’t going to be nearly big enough for most farmers. Kuylen has worked as hard as he possibly could, but he was not able to overcome the challenges he was facing, and now he is facing financial disaster. He would walk away, but he says he can’t because “I’ve invested everything I have in farming”…
Kuylen, who farms roughly 1,500 acres of wheat and sunflowers, lost $70 per acre this year, despite growing good crops. Current government subsidies only cover about $15 per acre, he said.
“There’s no incentive to keep farming, except that I’ve invested everything I have in farming, and it’s hard to walk away,” he said.
It would be nice to think that all of these farmers will somehow bounce back next year, but that isn’t likely. It is very doubtful that there will be any sort of a trade agreement with China before the 2020 presidential election, and global weather patterns are not going to be getting any more stable. Sadly, it is entirely possible that next year could be even tougher for U.S. farmers than this year was.
So please say a prayer for our farmers. They grow the food that we all eat on a daily basis, and their hard work is rarely recognized on a national basis. They are unsung heroes, and right now most of them are really, really hurting.
About the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.
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