Currency Emergency: When The Debt Comes Due – Investing.com

Currency Emergency: When The Debt Comes Due – Investing.com

What happens when the debt comes due?

It’s a question millions of Americans are grappling with in their personal finances. It’s also a multi-trillion dollar question facing officials in Washington, D.C.

How they decide to answer it – or evade it, as the case may be – will have profound implications for investors and anyone who holds US dollars.

For months, the financial media has been running stories about how the pandemic led to a surge in savings. The US consumer, thanks to a host of government supports including stimulus checks, student loan debt relief, and eviction and foreclosure moratoriums, is supposedly in great shape.

Why, then, are Americans taking on new debt at the fastest pace in over a decade?

The Federal Reserve reported this week that household debt surged during the second quarter by the most in 14 years. Much of that is represented by mortgage debt as buyers take on ever more in order to be able to buy homes that are rising rapidly in price.

Some perpetual optimists rationalize surging mortgage balances as sign of a strong jobs and housing market – forgetting how badly things can turn out (and did in 2008) when financial system leverage becomes excessive.

It’s not just houses