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 Americans are borrowing like never before as Federal Reserve data reveals that US households have raced to the edge of the fiscal cliff amid record high food prices, and skyrocketing inflation.With such a significant jump in borrowing, it would be foolish for us not to consider what this could mean for our already fragile economy.

With the words of fiscal cliff, economy, inflation and food prices at their peak, Americans are taking out more loans than ever before to cope with the rising expenses. A recent report from the Federal Reserve showed that U.S households have racked up a record high debt.

The Epoch Times reports, the Federal Reserve published a report detailing U.S. household debt swelled to a record $16.9 trillion in the final quarter of 2022, the largest quarterly increase in 20 years.

According to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, released on Feb. 16, total household debt balances increased by $394 billion in the fourth quarter.

Compared to the end of 2019, the last year before the pandemic recession, household debt balances are now $2.75 trillion higher.

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It is likely that household debt has increased due to a tumultuous 2022, in which the Federal Reserve boosted its benchmark interest rate by over 4 percent by the end of December from near zero last March, the fastest pace of monetary tightening since the early 1980s.

Interest rates rose sharply as the Fed sought to curb an inflation rate that had surged to a 40-year high. While inflation has eased in recent months, it’s still well above the Fed’s target of 2 percent.

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Nearly all types of debt became delinquent in the fourth quarter after two years of historically low delinquency rates. Credit card and auto loan delinquency rates rose by 0.6 and 0.4 percentage points, respectively, with younger borrowers struggling more.

39 percent of cardholders carried debt a year ago. Now, that figure is at 46 percent.

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According to TransUnion, serious credit card delinquencies will rise from 2.1% in 2022 to 2.6% in 2023. Unsecured personal loan delinquency rates will increase to 4.3% from 4.1% in the same timeframe.  

President Biden’s policies are responsible for this fiscal cliff as food prices skyrocketed and inflation looms large on the horizon. For most Americans, though, it might seem like a logical choice to borrow under current economic conditions. Unfortunately, some folks are finding out the hard way that borrowing too much can be a huge danger and leaving them forever stuck in the game of financial catch-up. To ensure a stable future for our country, reducing the amount of household debt is essential; otherwise we may find ourselves crossing over into an abyss beyond which there may not be recovery.

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