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Lending Tree's Trillion Dollar Nothing Burger

I have recently been made aware of a monthly report issued by Lending Tree that tracks credit card balances. Unfortunately, this is the kind of dross that is spread all over the internet in order to generate clicks, which generates ad revenue, but does nothing to actually inform anyone.

The article, written almost in crisis mode, is astounded at the amount of credit card debt amassed by Americans.

From the piece:

"This marks the third consecutive quarter in which Americans’ credit card balances topped $1 trillion, which had never happened before the second quarter of 2023. It also continues a trend of fourth-quarter credit card debt increases."

Well, as far as the fourth quarter increases, I believe that is known as "Christmas." And despite the shock and awe expressed by the author on these figures, not only is this the third consecutive quarter over a trillion dollars in credit card balances, absent an economic catastrophe, the next 100 quarters are probably going be "consecutively" over a trillion dollars too.

When you count in nominal dollars, and don't figure in population growth or economic expansion, the numbers, and your conclusions, are likely to be misleading. But that's not the point of these pieces. Stoking alarm is how you get attention, and that's all that matters in today's media landscape. The blue line on this chart? It's going to keep going up. If it ever goes down, a grey line will appear, meaning the economy is contracting.

The author continues:

"With this latest increase, credit card balances have risen by $273 billion since the fourth quarter of 2021. Americans’ credit card debt is $202 billion higher than the record set in the fourth quarter of 2019, when balances stood at $927 billion. {In other words, prior to the COVID lockdowns.}

These record balances are light years above the $478 billion seen more than 20 years ago in the first quarter of 1999."

Light years, huh? Do tell. After all, it's only been 20 years of population growth and mostly economic expansion. In 2004, there were 130 million people in the workforce. Now it's about 160 million. Things kind of, you know, add up.

The public reads this, and since the article lacks context, they immediately think something must be drastically wrong. But credit expansion is not only normal, it's necessary if you want the economy to grow.

I can't tell you how many people have expressed alarm over this "trillion dollar" number, as if it were a harbinger of imminent economic collapse. Quite the opposite. Spending and consumption are signs of confidence in your personal finances.


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