George Santayana memorably observed: “Those who do not remember the past are condemned to repeat it.”
Hey, does anybody here remember 2008?
A report released yesterday by the Federal Reserve discloses that Americans have just set a new record for accumulated credit card debt. The grasshoppers among us had saddled themselves with a total of $1.021 trillion in outstanding revolving credit in June, just edging out the previous record of $1.02 trillion set in April 2008. Total household debt in the U.S., which totes up housing, auto, student loan, and credit card debt, reached a new record of $12.72 trillion in March, which also passes its 2008 peak level.
Of course, those of us who do remember the past recall what happened in and around 2008 — banks failed, the subprime mortgage bubble burst, and the economy was thrown into the Great Recession. For a while, Americans reacted by tightening their belts, paying down their credit card debt, and getting rid of some credit cards — but those days of responsible consumer behavior apparently are long over. Recently, credit card debt has been growing at an annual rate of 4.9%, and more consumers are getting access to credit cards. More than 171 million consumers had access to credit cards in the first quarter of 2017, which is the highest such number since 2005, when about 162.5 million people had access to credit cards. And some banks have made the conscious decision to provide credit cards to people with subprime credit scores.
Gee, what could go wrong with this scenario?
It’s all not-so-vaguely and scarily familiar, but a lot of people apparently just don’t care. They think times are good now, and therefore times will always be good — so why not use that credit card to buy another impulse purchase consumer good that they don’t really need? The problem is that, in our interconnected economy, the irresponsibility of the grasshoppers can pull down the ants among us, too. If the heavy credit card borrowers start defaulting on their debts en masse, and banks and businesses start feeling the pinch, we’ll feel the unfortunate results, too.
If Santayana were still with us, maybe he’d change his famous statement to read: “Those of us who remember the past but are unfortunate enough to live with other people who do not remember the past are condemned to repeat it, whether we want to or not.”