A Debt crisis in the US is around the corner!

As a result of raising interest rates to counter high inflation, the repayment risks for households and small businesses in the US have increased.

In the second half of this year, household debts amounted to $16.15 trillion, driven by a $207 billion rise in mortgage balances.

Although there has not yet been a rapid increase in cases of default, the Federal Reserve reports that there is an increase in defaults on credit card and car loans, especially among low-income segments.

According to the Federal Reserve, total US household debt stocks are now more than $2 trillion higher than they were in the last quarter of 2019 before the pandemic.

What happens is like a trap.

During the pandemic, the Federal Reserve directly pumped liquidity to individuals and companies in order to stimulate the demand and supply sides, which allowed the existence of large financial blocks that individuals invested in purchasing assets such as housing.

During the pandemic, there was an increase in the demand for housing, as if the banks had a lot of money available, which happened at the beginning of the millennium when the Fed cut interest rates after the “technology bubble” crisis that hit the financial markets in the year 2000.

Bonds extensively, and even preferred to lend in the market… Today, these families find themselves facing different borrowing costs amid price inflation and a general stagnation.

It’s the capital debt trap.