I spotted this one yesterday on Twitter:


There’s nothing unusual about a big jump in credit usage during December – it’s called Christmas. You know, the celebration of the Nazarene’s birthday. You must remember it: the bloke who said ‘give all your money away if you want to get into Heaven’ has his birthday marked by the tradition of borrowing money you didn’t give away yet in order to celebrate his arrival on Earth.

What’s surprising is how much more credit was used to out-gift the Jones’s than the expert consensus expected – nearly one third more at just over $21 billion. But overall sales in December were the worst on a like-for-like basis since 2009: the season was saved from even deeper gloom by a last-minute buying spree. Such late surges are almost always credit-card dominated.

America is the most credit-addicted nation on earth, where the average credit card debt level per household is a whopping $15,355. Since 2010, the sum has actually dropped in real terms, but only by a very small amount: and you need to take account of how misleading that average can be.

1 in 5 Americans can’t get approval for a credit card, so when added to those who choose not to have a card at all, the ‘average’ is nearer to $18,500. Then you need to add on car loans at $12,300. The degree of dependence on credit is reflected by the fact that, while household income has grown by 26% since 2003, the cost of living has gone up 29% in that time period. And stuff like medical insurance, food and housing rises have been closer to 40%.

The more one drills down, the more scarey it looks: 1 in 3 American adults have debts that have been passed over to debt collection agencies. Three quarters of all household debt is in mortgages, a reflection of how borrowers have been into ‘extend and pretend’ for some time now.

This is the bottom line: as the credit information Cardhub notes, “Such levels of hugely expensive debt are unsustainable”. Without credit, auto sales would collapse. Without Zirp, the entire domestic economy would collapse. With too many more rate rises from the Fed, 44% of American household finances would collapse. As and when interest rates return to normal – say at 3-4% – two out of every five US tax dollars will go just on servicing the American national debt.


These realities are what makes the day-to-day debates on CNBC, CNN, BBCNews and Boombust TV a surreal thing to tune into. Not just surreal, but also abstract – because the terms used are in the syntax of yesteryear. The equivalent, in fact, of Mark Carney facing a media conference and announcing the devaluation of the Guinea.

Growth is one of these silly nouns. There hasn’t been any earned-income and expenditure growth in the US this century. It is overwhelmingly brought-forward consumption fuelled by debt.

Discretionary income is another. If 30% of your debt-spending goes on plastic-bashing and car loans, and 75% on mortgage repayments, not only does that come to 5% more than your credit line – hence the 1-in-3 stat above – it also amounts to an average figure of $120,000 a year. The median US income today is around $53,700. The vast majority of Americans have negative discretionary income….aka, debt.

Savings ratio is an equally potty measure in that context. 62% of Americans have less than $1000 in savings. 76% of Americans describe themselves as “living from paycheck to paycheck”. Just under 50% of US households have no retirement savings at all.

Recession – as in “we are not in a recession and we are not heading for one” – is probably the most bizarre assertion of the lot. Without QE (which the Fed ‘counts’ as gdp), Zirp (and now Nirp) and credit based brought-forward consumption, the United States economy wouldn’t be in recession: it would be flatlining.


The focus on America in this piece is quite deliberate, but has the best of intentions. The United States with $17.4 trillion has a 22.5% share of global gdp. Troubled China at 14% (and falling) is still way behind. The EU is closer, but not a Sovereign State.

In real (by which I mean ‘get real’) terms, the wealth spread, demographics, debt levels and credit culture in America means the US élite will never allow ‘rates’ to return to anywhere near normal. To do so would be to bring on the following inevitabilities:

  1. Crashed US domestic economy unable to maintain sales…in a country long since over-dependent on such sales given its expensive export dollar
  2. Crashed US banking system unable to call in debt assets
  3. Exploding trade deficits as pauperised US consumers buy Asian
  4. Disastrous retail & manufacturing bankruptcy levels
  5. Trebled unemployment & consequent social instability
  6. Increased taxes to service Sovereign debt
  7. US Sovereign default
  8. Given massive levels of US imports, total collapse of the global economy.

I do realise people think I’m bonkers for sticking to this view, but we have an alternative to US hegemony developing on the planet, and before too long that axis will be empowered in several ways:

  • It can renege on Dollar-denominated debt. This comes under the social resistance heading of “they can’t send all of us to jail”
  • It can massively reduce US petrodollar income
  • It can up rates to attract investors desperate to preserve their wealth
  • It can cut Washington out of future trade deals – just at a time the US is most likely to need such deals.


The US is running the show in 2016. But its debt culture will one day fatally undermine that omnipotence. Without drastically reforming that culture (and learning new foreign policy manners) the US will drag itself over the cliff faster than most people think.