U.S. Economy Grew at 4.9% Rate This Summer, Powered by Fast-Spending Americans | Hacker News Reader

U.S. Economy Grew at 4.9% Rate This Summer, Powered by Fast-Spending Americans

wsj.com

44 pointsAnon8438 comments

And yet the debt is growing faster, expected to be at an all-time high 107% by 2029.

Edit: Why disagree? I think it's important to see the whole picture and not just the parts we want to see. https://finance.yahoo.com/news/us-cant-grow-way-33-021833651...

Who are these "fast spending Americans" and what exactly are they spending more on?

Affirm, Klarna, and other services for deferred payment are just credit card debt in a different form. They’re used to encourage impulse buys like expensive event tickets.

Seriously go to an expensive event like the Cowboys v 49ers game or Taylor Swift concert and look around. It’s not a bunch of millionaires pow wowing around.

Credit card debt is at a high, for one.

https://www.wate.com/investigations/retail-credit-cards-apr-...

There are also a lot of headlines about the average car payment being at a record high, well over $700 per month:

https://money.com/average-car-payment-record-high/

Would love to see a chart of average car payments to income ratio.

That’s depressing, particularly given the recent trend of car loans having longer and longer terms, disposing with the conventional wisdom of no greater than three years.

Credit card debt as a % of disposable income is similar to pre-covid https://fred.stlouisfed.org/graph/?g=1aFmn

Most of the "consumer debt reaches all time high" events are explained by a larger economy and inflation making the numbers bigger than 2019.

"A recent Bankrate survey found that 47% of credit cardholders carry a balance month to month. 60% of those carrying card balances have been in credit card debt for at least a year."

This sounds pretty scary. But I also wonder what they mean by retail credit cards. Does that include retailers who offer 24 months interest free on a big purchase when opening the card?

> * Does that include retailers who offer 24 months interest free on a big purchase when opening the card?*

Yes, it would because that's an ongoing/carried balance.

And you're right.. a better analysis would be: how many people continue carrying a balance after their introductory rate goes away?

Because retail credit cards have the highest rates by far:

> The average retail credit card annual percentage rate (APR) hit a new record high of 28.93% this year, up from 26.72% in 2022 and 24.35% in 2021, according to Bankrate’s annual Retail Cards Study out Monday. 28.93% APR is well above the national average, which clocks in at 20.71%

Ref: https://www.foxbusiness.com/economy/retail-credit-card-rates...

Don't forget about the most insidious aspect of these retail cards. Once that promotional no-interest period expires, your balance gets hit with all the accrued interest from the promotional period.

So, anyone thinking of taking advantage of these promotions take heed: Pay off the entire balance before the promotion expires!

This makes that debt really hard to measure. These debt bombs that retroactively make you have carried a balance for years in the past.

Don't include them: you're missing all the people who transform into high debt carriers.

Include them: you sweep in all the people who set an automatic payment to pay it off with a couple months to spare and forget about it.

To further complicate things, the entire "Buy Now, Pay Later" industry does NOT report to credit agencies, etc until someone is late on payments (not sure how many days late).

Therefore, there's an entire pile of debt that also is invisible to these metrics.

Probably. I think a year of interest free payments is smart, but not if you have several maxed out cards, and high overall debt to income ratio.

Debt to income would probably be a better metric?

Probably all Americans to some degree, and sure they're spending more but with rampant inflation, they're definitely not buying more.

That number is already adjusted for inflation.

My net worth went up like 20% this month with Bitcoin Cash. Maybe there are a lot like me?

This is quite an interesting "recession"

All the anecdotal evidence I get is all topsy turvy. Unemployed brother who works in tech tells me he's now got recruiters reaching out to him again. Friends who work in tech sales say that they're struggling to sell. Everyone in general keeps complaining about prices and inflation. Every city keeps breaking home price records.

I don't think anyone understands this market or even this economy anymore.

Fueled by rising public and private (credit card) debt.

It’s be expected in a period of >0% inflation, most of that debt is going to be valued less in 100 years so it’s best to take it on now before the economy booms again and inflation gets back up to 70s-80s levels.

Even the government pays above the (current level of) inflation and it has to refinance a big chunk of its debt in the next 1-3 years. Personally, I highly doubt the government spending is efficient enough for this. As for the average Joe, card debt is really expensive (20+%). You will not get repeat of the 70s with the current debt levels and aging population, so your bet is effectively a hyperinflation scenario.

If you're using that debt on productive or appreciating assets, that's a good perspective.

Is that what individuals and governments are spending the money on?

It wasn’t “fast spending”, it was spending on necessities, but the necessities cost 60-70% more. It’s not like people have more money to spend, most of this is borrowed spending that people are forced into. Cc debt chart I bet is skyrocketing. And household savings are probably declining at a fast pace.

Dupe: https://news.ycombinator.com/item?id=38025177

Generative AI is responsible for a significant portion of this growth no matter how badly folks here may not want to admit it.

Ummm...how?

And this will reverse as soon as student loan payments kill the last of people's savings.

College educated adults have a higher earning potential than non-college-educated adults. They also come from higher socio-economic backgrounds.

I have opinions about this policy but I’ll leave them for another forum

> College educated adults have a higher earning potential than non-college-educated adults.

This isn't true.[1]

[1] https://www.nytimes.com/2023/09/20/podcasts/the-daily/is-col...

Your linked article doesn't propose that the earning potential of college graduates isn't higher, it just states that people think the tuition price might not be worth it.

College educated adults absolutely have a substantially higher earning potential on average.

Could you point to the part of your link where the above claim is refuted? I don't see it.

Ah, my bad. Here's a quote from the transcript:

> But when they looked at young people who were born after 1980, in the 1980s and 1990s, their wealth benefit was much smaller. And for certain cohorts, for Black and Latino-headed families, that college wealth premium had disappeared altogether. So a college grad wasn’t amassing any more wealth over their lifetime than a high school grad.

Essentially, total income ≠ total lifetime earnings. Wealth is what people really care about when comparing (non)college wages. Fact is, college is a big gamble now. For more explanation, read past the cited quote. (Or listen to the entire podcast, if you can! It's really interesting!)

When my $500/month student loan payments kick back in, you better bet I'm not going to be spending that $500/month on toys. This is about absolute dollars spent.

It sounds like you're mad that you voluntarily took someone else's money and are expected to repay it? Of course, if you take a loan, you'll have to make future financial plans to budget less for frivolous expenditures

I'm not mad about anything, or arguing policy about student loans. I'm just stating a fact - spending will decrease when people have less cash to spend. Why is that controversial?

Doesn't sound like that to me if you look at what they're responding to.

I think you may be trying to make/respond to an ideological argument that I don't think that post is making.

Thats what it sounds like to me

Reply on news.ycombinator.com