Name: Charts that Count: will Covid-19 light the fuse on a debt bomb?
Uploaded: 2020-05-22T10:56:21.000Z
Duration: 3 min 18 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

In the last financial crisis household debt was at the very

Bad US mortgages and bad mortgage securitisations

forced the entire global financial system into disarray.

This time the crisis is caused by a virus

But it is still worth asking whether the $14.3tn in US

household debt might not act as a dangerous accelerant,

making an already serious crisis much worse.

since the Covid-19 virus took hold of the US economy.

If those translate into waves of defaults

First, the US government has shovelled billions of dollars

directly into the US economy, cutting cheques directly

to households, supplementing unemployment

seem to have learned some important lessons

Household debt relative to household incomes

has come down significantly over the last 10 years.

Falling interest rates have amplified this effect.

Household interest payments relative to household incomes

are not just low; they are at all-time lows.

But there is some less encouraging news as well.

taken place in US households over the last 10 years

Americans owe less on and have more equity in their homes

But if you take those mortgages out of the picture,

the deleveraging looks much less impressive.

Americans owe only a little less on their credit cards

and against their cars than they did a decade ago.

Even before Covid-19 hit delinquencies on auto loans

fallen as the last crisis has disappeared

Many of the job losses caused by Covid-19

are in industries like hotels and restaurants

that employ a lot of hourly workers who may not own homes

but are likely to owe money on their cars

Government support should keep these and other workers

But eventually, the government's support will stop.

And if the jobs have not returned by then,

there will be a wave of defaults and personal bankruptcies,

the consequences of which we can only guess at.