The Debt Bubble Expands as Auto Loan Amounts Hit a New Record

Is anyone surprised that the poorest and least credit worthy of Americans are being saddled with piles of debt in order to buy new cars? It’s not enough that a generation of our citizens will toil pointlessly to pay off more than $1 trillion of student loans, we may as well add some other form of debt burden on top of it.

It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is. Creative ways for people to purchase cars they can’t afford have been on my radar screen for some time now, and if you recall, I posted an article last April titled: Just Keep Dancing: Introducing the 97-Month Auto Loan.

Well the dancing has continued, and now we have Americans borrowing at all-time record levels to buy cars. USA! USA!

From CNBC:

A combination of higher prices for new cars and relatively low rates for auto loans means Americans are borrowing a record amount to pay for their new rides.

According to Experian Automotive, which tracks millions of auto loans written each quarter, the average amount borrowed by car buyers last quarter climbed above $27,000 for the first time ever.

According to Experian, the average auto loan in fourth quarter 2013 was $27,430—an increase of $739 compared with the same period of 2012. The average used car loan was $345 higher, coming in at $17,974.

Those with non-prime credit ratings—or credit scores between 620 and 679—had the highest average auto loan. For these borrowers, the average new car loan rose more than $1,500, to a new high of $29,385.

Not surprisingly, those with subprime credit ratings—credit scores between 550 and 619—had the highest average monthly payment, of $499.

Yep, no doubt this will turn out just peachy.

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Forget Student Loans…Introducing Day Care Loans

Now that enough college age Americans have been stuffed with over a trillion dollars in student debt only to get a job a McDonalds and live with their parents, folks in New York City have come up with a brilliant new concept to ensure the production of an entirely new generation of debt slaves. Introducing day care loans…and here’s the best part, they are “interest only” from childcare to kindergarden!

Of course it makes sense that these loans would originate in my hometown of NYC, which has in the past 15-20 years fully transformed itself into a corporatized, generic and unaffordable Wall Street whorehouse. From CBS:

NEW YORK (CBSNewYork) — After housing, child care is one of the largest expenses for families in New York City.

But now, there is an option for parents to get their kids into some of the city’s top pre-kindergarten programs with loans just for day care.

As CBS 2’s Janelle Burrell reported Monday, tuition without room and board for undergrads at Harvard University is $38,891 for the 2013-2014 school year. For Princeton University, it is $40,170.

Pre-school in Manhattan is not far behind, with some elite day care costing families more than $35,000.

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Chart of the Day: Inflation Since the American Revolution

As is clear by this chart, inflation was virtually unheard of until the Creature from Jekyll Island (the Federal Reserve) took over.  However, more importantly, things didn’t really start to get bad until the 1970′s right after Nixon took the nation off the gold standard in 1971.  Since that time, America has seen a period of non-existent real wage growth and a huge gap grow between the rich and the poor.  Nothing like livin’ the debt slave dream!

Welcome to the New America: Indebted “Boomerang Parents” Move in with Their Children

A very sad article from the New York Times, but I can’t say I’m really surprised.  In the ultimate irony, in many cases throughout America it is actually parents that are forced to move in with their kids due to the piles of student loans taken out on their behalf.  We are officially a nation of unemployed debt slaves.  Aren’t you glad we bailed out Wall Street?

From the New York Times:

It has been six years since Ms. Fitzgerald — broke, unemployed and in default on the $18,000 in loans she took out for Jenni’s college education — became a boomerang mom, moving into her daughter’s townhouse apartment in Hingham, Mass.

In the first three months of this year, the number of borrowers of student loans age 60 and older was 2.2 million, a figure that has tripled since 2005. That makes them the fastest-growing age group for college debt. All told, those borrowers owed $43 billion, up from $8 billion seven years ago, according to the Federal Reserve Bank of New York.

Almost 10 percent of the borrowers over 60 were at least 90 days delinquent on their payments during the first quarter of 2012, compared with 6 percent in 2005. And more and more of those with unpaid federal student debt are losing a portion of their Social Security benefits to the government — nearly 119,000 through September, compared with 60,000 for all of 2007 and 23,996 in 2001, according to the Treasury Department’s Financial Management Service.

The consequences of such debt can be dire because borrowers over 60 have less time — and fewer opportunities — than younger borrowers to get their financial lives back on track. Some, like Ms. Fitzgerald, are forced to move in with their children. Others face an unexpectedly pinched retirement. Still others have gone into bankruptcy, after using all their assets to try to pay the student debt, which is difficult to discharge under any circumstances.

I don’t know how much abuse people will take before they start fighting back.  We’ll find out in the coming years.

Full New York Times article here.

In Liberty,
Mike