DANGER: The Trillion Dollar Credit COLLAPSE

we're going to talk about how we just

broached one trillion dollars in debt

but we've got to talk more about

who's actually going into debt who's

actually becoming unemployed who's

actually having more pain in terms of

their income like which income

demographic is getting smashed first

we're going to react to a video that

addresses some of these statistics We'll

add perspective to this then we'll get

into what Bank of America discovered in

terms of specifically

who's actually suffering we'll also look

at American Express and Capital One to

see what they have to say so we have a

lot of really good information to cover

if you want more detailed information on

what's actually going on with Consumer

Debt and what we might be up against in

terms of a consumer debt-led recession a

good old bubbly world so let's listen in

to this segment here from breaking

points and we'll react to some of the

commentary they provide here we go loan

payments coming back into effect this

fall could be a very dangerous State of

Affairs for a lot of Americans let's go

and put the numbers up on the screen

from the New York fed they put up this

helpful GIF on Twitter or X or whatever

the hell it is now um showing the levels

of debt I mean you can see that that red

uh that red SWAT there that is student

loaned at 1.57 draw I mean that is truly

astonishing you can see the credit card

debt there that's the orange rising to a

trillion dollars auto loan debt 1.58

trillion and other at 0.53 trillion so

uh Americans really increasingly loaded

up with debt and needing their and this

by the way very true the nominal levels

of debt are absolutely Rising but there

are some additional things to consider

here before we get to the bearish part

of where are people actually suffering

like which level and that's not funny

either but it's like before we get to

that before we get to the painful part

uh let's talk about what what this

potentially actually means and the first

thing that we have to consider is a lot

of people are talking about how student

loan debt is going to crush the economy

that people are going to have this

potentially average extra payment that

they have to make of around 383 dollars

per month and that could potentially

reduce consumer spending by an aggregate

total of five percent what's really

important to remember here is that Joe

Biden's plan for student loan repayments

has actually essentially extended

people's ability to start repaying for

about one year so roughly right before

the election now I find this really

interesting because what you have is

a student loan repayment regime an

obligation to repay that starts

here shortly uh in about a month but if

you don't make your payment they'll just

add your interest to the back of the

loan for the next 12 months and they

won't report you as delinquent to any

kind of credit bureaus or add any late

fees so basically for no additional fees

you essentially have your student loan

as a line of credit that you don't have

to start repaying for another year

I personally think that is going to

buffer uh how much of a of an impact we

actually get from the student loan

disaster because I think people will

start repaying at different places right

it's not like all of a sudden you know

September rolls around everybody has to

start repaying you get that instant hit

some people start repaying in September

some will start repaying after the

holidays like January some will think

that they can start repaying in January

but then don't start paying until March

or April or May or you know next year

when they actually start having to make

those payments that's really important

uh now

the next thing to consider uh is so

first of all you're going to have sort

of that tapered response the next thing

to consider which is pretty remarkable

is that right now household Debt Service

payments as a percentage of disposable

income are very low relative to

historical standards we're sitting at

right about 9.6 so if you have a hundred

dollars left to spend on whatever you

want only nine dollars and sixty cents

are going to debt right now before the

2007 crash 2008 crash we were about 13

out of every 100 going to debt payments

uh before uh the early 90s pain and even

in the late 80s in the SNL crisis we

were at 11 to 12 dollars before the.com

Bubble Burst we were at twelve dollars

really right leading up to the pandemic

we were close to 10 to 9.8 now we're

sitting at 9.6 so we're relatively at a

lower level for a percentage of debt

payments to be made despite the fact

that that is nominally higher normally

means non-inflation adjusted if we

actually inflation adjusted uh how much

higher debt levels are now

total uh credit card debt levels if we

actually inflation adjusted those now

you'd have to actually take off another

18 to get back to February of 2020

levels which is pretty crazy because if

we look at 2020 levels and we pull off

18

we would actually have lower

inflation-adjusted debt now than we did

in the pandemic look at this chart right

here on screen you're going to see that

right now we just broached a trillion

dollars this Lending Tree chart hasn't

updated with the latest info that came

out in the last couple days we just

broke a trillion dollars okay fine but

if you take 18 inflation off of this

you'd actually be inflation adjusted at

about 820 a billion dollars 820 billion

dollars puts you right about here which

is closer to the peak that we saw in 07

but not the peak that we saw before the

pandemic which is pretty remarkable so

inflation adjusted we're actually lower

than where we were

before the pandemic kind of crazy and

this is the problem with nominal

analysis of numbers like oh it sounds

big and bad to say oh a trillion dollars

in that that's bad right it sounds bad

uh and you know it makes for good videos

but there is actually an underlying

problem and I want to remind you we've

got to talk about that underlying

problem because there is an underlying

problem before we do that we're going to

listen to uh one more part from the

Crystal and Seeger part here we're gonna

go to 3 or 735 in this video we're going

to look at some of these stats they

report from Yahoo finance and then we'll

get into some of the credit card actual

bad news here now I quickly want to

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at stockhack.com okay so what do we have

here let's get this data I've had credit

card debts stretching back decades to

before 2006 and in to me the most

disturbing uh indicator here they say 49

of Americans so very close to a majority

of Americans actually depend on credit

cards now to cover essential living

expenses those numbers are even higher

for young people gen Z 61 of Zoomers

rely on credit cards just to be able to

pay their normal living expenses 53 of

Millennials on the other hand Boomers in

a very different category only 20 26

percent of Boomers rely on credit cards

to cover essential expenses so I mean

Sagar this fits with a lot of what we've

been reporting at this point for years

so on this data it's really interesting

they argue that it's gen Z and

Millennials who are relying on credit

cards more

but is that actually the cohort that is

really relying on credit cards more or

are they just using credit cards more is

there a different metric that's actually

going to show us who is suffering the

most and the answer to that obviously

since we're talking about is yes first

to understand a little bit more though

it's worth looking into

the earnings sheets that I have from

Capital One and from American Express so

let's take a peek at some of the notes

that we get from these so if we jump on

over to American Express take a look at

this

Millennial and gen Z customers continue

to be the fastest growing portion of our

card member base with Billings up 21

year over year in the quarter of

particular note are international card

business was the fastest growing segment

for several years and it is again the

fastest growing segment and this is

being driven by strong travel and

entertainment spending which is really

associated with Gen Z and Millennials a

lot more of that travel spending I mean

there was a report in the Wall Street

Journal this morning that Millennials

and gen z's are basically flying around

the world to follow Taylor Swift around

and causing traffic pattern delays and

screwing everything up they're blaming

t-swizzle again love T Swizzle but

anyway we also saw continued strong

demand for our premium products with

over 70 percent of new accounts we

acquired on fee based products and sixty

percent of new accounts acquired

globally coming from Millennials in gen

Z so it's true More Travel spending in

gen Z and Millennial is getting more

cards but does that mean they're the

ones suffering no not necessarily we'll

get some more detail here a little bit

more from American Express gen Z

Millennial spending is growing it's not

the Boomer sector that's spending more

money it's actually and we expect this

to continue to pick up as the economy

gets better what's actually getting hit

based on American Express is the small

business sector which the small business

sector and the entrepreneur sector is

going to give you a little bit of a

heads up as to where the pain is coming

you're going to get more details from

Bank of America in just a moment but

first let's drive up over here going to

Capital One Capital One usually has

lower credit score customers and they do

indicate that they're starting to see

defaults and charge charge offs Trend

backed to covid level like pre-covered

levels that they're still below

pre-covered levels but we're kind of

trending back to that and the Capital

One customer has actually seen

relatively flat spending Capital One

customers usually a lower credit score

than your more premium American Express

customer okay great so now what is the

Bank of America reveal on who's actually

getting punished here because remember

we keep hearing Millennials and gen Z

getting more cards and spending more

money especially the higher credit score

ones compared to the Capital One ones

and we heard from Crystal and Seeger

that oh well Millennials are you know uh

taking on potentially uh more debt

increasingly relying on the credit cards

but are they actually relying on the

credit cards well here's Bank of America

Bank of America right here says that

lower and middle income households

remain resilient oh this is interesting

so now we're talking about income think

about what we've talked about all these

different things for a moment we've

talked about Generations

then we talked about entrepreneurs and

Biz owners right then we talked about

credit score the lower credit score

spending flat

younger generation spending up

but now we're going to talk about the

most important one and that's the income

demographics So based on incomes what's

going on well based on incomes lower and

middle income households remain

resilient however higher income

households still appear to be under some

pressure from slower wage growth and

incrementally weaker labor markets

the trough of good spending might now be

behind us as we've moved from Goods to

Services spending in that rotation and

excuse me now we're kind of returning to

pre-pandemic spend levels so in other

words we might see this flattening of

overall spend and then an increase in

spend again as we kind of normalize and

go back to uh you know pre-covet Trends

but look at this folks different income

groups are experiencing different

results lower and middle income

households remain fairly resilient

higher income households feeling the

pinch in addition higher income

consumers experiencing a faster rise in

unemployment and a bigger drop in wage

growth have these Trends continued in

July our Bank of America data says yes

look at this folks here's a chart after

tax wages and salaries growth by income

group The over 100 twenty five thousand

dollar income group is actually negative

while you were negative here for a

moment you're barely positive so you

actually went negative on wages for the

over 125 000 income group

at the same point or same token you

actually see the number of households

receiving unemployment benefits uh

elevated for the 125

000 income group so the 125 000 income

group sees elevated unemployment

benefits uh with a 60 to 70 percent

increase in unemployment benefits

the 50 to 125k segment seeing about a 40

increase in unemployment benefits and

the under fifty thousand dollar cohort

only seeing about a 25 increase in

unemployment benefits now this is kind

of remarkable because it's the opposite

of what you would think draw this out

for a moment let's so we can sort of

reconcile this uh correctly so what I

like to do is I like to just draw a

t-chart and what we're going to say here

is who's doing worse and then who's

doing better right because this is going

to potentially help us understand

potentially where to invest and so who's

doing worse higher income is doing worse

who's doing better lower and mid income

that's the opposite of what you would

expect right who's doing worse lower

credit scores that's your Capital One

right who's doing better your American

Express higher credit scores

who's doing better employees or

entrepreneurs employees are doing better

who's doing worse entrepreneurs are

doing worse and small Biz are doing

worse

who's doing better

gen Z and Millennials are doing better

he was doing worse well in many regard

older segments like potentially not

Bloomers Boomers Boomers there we go uh

the reason for this by the way could be

because of stock market sentiment over

the last year so I like personally I

would take a screenshot of this if I

were you I think it's a good

distillation here I'll freeze for a

moment

there you go I take a screenshot of that

because I think it's it's relatively

consistent with what we're seeing in the

actual data uh there was a sentiment

chart here somewhere yeah yeah see look

at this the higher income uh threshold

salt the look the biggest drop in

sentiment

uh the lower income tier didn't see as

much of a sentiment decline a lot of

that probably driven by the stock market

that's my opinion uh so that's something

to pay attention to uh higher income

households feeling a little more

cautious since Bank of America now this

is surprising to me because again we

hear this idea of oh my gosh there's so

much credit card debt okay that implies

that it's lower income consumers or

lower credit customers who are suffering

and they're having to spend more on

credit cards when the potential reality

is it's actually

your white collar group who's

potentially having to spend more money

on credit cards and maybe that's why the

nominal levels of credit are higher

because they have you know large

raincomes but larger expenses

somewhat surprising uh it uh you know

doesn't take away from the fact that

we're probably walking into a big credit

bubble I mean consider that you also now

have to factor in buy now pay later and

personal loans uh as as an expansion of

credit buy now pay later a much more

recent Innovation Innovation dare I say

but I mean now you go to checkout on

Amazon I was just I was just ordering

something on Amazon yesterday it was

actually a bundle of things it was like

it was going to be like a thousand

ninety seven dollars and I'm like you

know quickly processing through the

checkout putting my little po number and

then I'm like all right check out and so

I go to check out and the Checker window

I'm like all right just pay with the

Amazon card like I always do because you

get you know five percent

well I go to hit checkout and then it

they kind of move the checkout button

down a little bit from where I was used

to it being because now they put a

little bubble up and it's like don't

want to pay a thousand ninety five

dollars now why don't you pay 93 a month

for the next you know I don't know X

months or whatever it was and I'm like

yeah I don't know if that's a long-term

good thing uh it makes me a little

nervous that we could be creating a

longer term debt bubble cycle and I

personally recommend people stay away

from buying out pay later so a lot of

people use it just to manage cash flow

and I understand that I'm not the

biggest fan though of uh taking on uh

consumer style debt uh you know

obviously if you have some sort of

extreme business purpose for something

and you're willing to take on that risk

there's an argument for debt but with

any debt comes risk so that's always

something to consider real estate debt

though obviously I rank at the lowest

level of risk especially if your rent

covers your mortgage anywho those are my

thoughts on this trillion dollar debt

bubble cycle yes in the longer term the

debt bubble will probably be an issue

but here in the shorter term it's

actually surprising to see that's the

higher income demos those entrepreneurs

that are that are getting a little bit

punished a little bit harder not just

entrepreneurs obviously you have a lot

higher income salaries as well whether

it's in finance or otherwise so now I

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