On February 18, 2014, CNN Money reported that Americans are borrowing more money and using their plastic at levels not encountered since before the Great Recession in 2008. In the last quarter of 2014, overall household debt rose across the country to a staggering $241 billion dollars. Many consumers are wondering the cause of this jump, and if it shows signs that the economy is on its way to a full recovery. Read on for a look at why many Americans are borrowing more money and what this means for the country’s future.
First Increase in Debt Since 2008
The levels being reported are the first increase in debt since the year 2008. While spending is still 9% lower than it was in 2008 before the Great Recession, it is still showing signs that Americans are spending again and willing to take on more debt. During the Great Recession, many industries went belly-up including the auto industry, housing and several other loaning resources including Freddie Mac and Fannie Mae. Since then, the American economy has struggled to get back on its feet. Is this a sign that the country is moving towards a total recovery?
Careful Debt Planning
It appears that the average American is being careful about taking on more debt after the Great Recession of 2008. Many Americans lost their jobs and their homes, and truly struggled to not only make ends meet, but to keep their family afloat overall. With debt numbers going up, some people would suggest that it should not be looked at as a positive aspect of American life, however, higher consumer debt means that citizens are buying into the market once again and helping to allow the economy to improve. They are also starting to invest again, buying stocks and share in money mutual funds.
The Bottom Line
While debt is still lower than it was in 2008, it is important to note that this is the first sign of increased spending and taking on more debt since the bail-outs started. This could be a sure sign that the American public has more confident in the economy and are now freeing themselves to spend and take on more debt, rather than save for a rainy day. While there is nothing wrong with saving, especially in a down-turned economy, spending helps to keep our economy and business afloat, creating more jobs and enhancing industry. Only time will tell if this debt trend continues into 2014.