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The Credit Card Realm in Pictures

CAMS Weekly View from the Corner - Week ending 6/7/24

June 10, 2024

Strewn throughout various editions we have hinted at or specifically addressed the tremendous increase in credit card usage during this price inflation era.  It has been customary as this era has unfolded to see the monthly consumer credit categories be led by credit cards in terms of their percentage increases. 


The absolute collective balances of credit cards system wide has catapulted higher in this price inflation era to the tune of over $1.3 trillion. 


In attempting a succinct narration of the previous decade for credit card usage we offer from 2014 up to 2020 there was a gentle but consistent uptrend in the usage of this type of debt.  At its peak in early 2020 we seen the cumulative level hit $1.1 trillion. 


Then with the onset of the Covid-19 economic shutdown and follow-on massive free money distribution nationwide the citizenry proceeded to pay down credit card balances resulting in the peak $1.1 trillion collective balance drawing down to a low point of $970 billion by early spring of 2021.


By early summer of 2021 the citizenry brought on a new launch point for credit card usage that changed the gentle trend of 2014-2020 to a rocket launch by comparison that has generally remained in place as this price inflation era has taken root.


This launch has lined up with the takeoff of price inflation dating back to early 2021 with the follow-on experience of everyday wage growth rates, when adjusted for price inflation, turning negative for a large part of this era. 


In recent time we have seen said wage growth rates turn positive but only marginally so which has not offered much if any reprieve to the everyday household’s economic challenge during this era.  


Interestingly, as credit card interest rates have catapulted higher it has not deterred the usage of this type of debt. 


This completely debunks the old adage that if you want less of something increase its price.  In the case of money its price is the interest rate but this increased price has done nothing to deter credit card usage.  Is this a sign of economic desperation? 


Relative to our topic at hand, as time has unfolded in this era we have observed the continual increase in the delinquency rates for credit card payments.  This is a logical follow-on when reading this recent storyline as laid out above.


Below we offer the above short narration in picture form via the data relative to the overall topic with its component parts displayed accordingly.  All views are consistent in time with the previous decade displayed throughout except when noted.

Average wage growth rates when adjusted for price inflation have been struggling at best.  Our red circle depicts this price inflation era which is a dramatically different experience for the everyday household when viewed through the lens of the previous decade.


Our red horizontal line acts as a line in the sand of price inflation adjusted wages relative to the previous ten years.  We can see our current positive growth rate for price inflation adjusted wages is paltry. 

The above is the year-over-year growth rate of credit card usage with our red arrow denoting the explosive trajectory in growth rates with the onset of this price inflation era circa early 2021.


While the growth rate peaked over a year ago we are still witnessing year-over-year growth rates that remain at the highest levels of the previous decade.  Our red horizontal line denotes this line in the sand on a historical comparative basis.

As offered previously, so much for an increase in X price to dissuade activity or usage eh.  Above is the typical interest rate charged on credit cards system wide.  The continual increase in this “price” has done nothing to change behavior by the citizenry at large.


This in time leads to the expected logical follow-on which is showing up below.

Delinquency rates have catapulted higher as the above storyline has unfolded.  Our red horizontal line denotes the highest level for the previous decade which was easily taken out to the upside via our red up arrow.

Relative to delinquency rates we thought it worthwhile to expand the view to capture recent decades for a broader perspective.  While the previous decade chart for delinquency rates appeared imminently ominous – a broader historical perspective offers we remain below historical highpoints. 


This does not negate the trend nor that we are at 12 year highs.  This is important in particular when realizing our collective credit card debt level is a half-trillion dollars higher than it was 12 years previous.  There’s some perspective in and of itself. 


The Big Picture


When viewed at a high level this entire storyline underlines the absolute necessity for price inflation to be job number one for various D.C. leadership branches as it undertows more and more of the citizenry.  This then feedback loops to the economic system at large.


We can talk about wage growth rates moving upward but if those growth rates are overtaken by the inflation growth rates society as a whole is moving sideways at best and backwards given enough time.  Given time, price inflation eras come searching for nearly everyone in the economic system.


As an aside, if you are a consistent reader of these editions, this is why we have gone full ad nauseam during this price inflation era relative to various D.C. leadership branches generally and the Fed specifically. 


To lackadaisically assume that price inflation was a done deal once the 8% level became 5% and then 3% was and remains the height of irresponsibility relative to the importance to the citizenry and through them the broad economic system.


We are not out of this era by any stretch of the imagination.  The question that remains and one that we have intermittently offered during this price inflation era is will the economic landscape go to recession, as in past price inflation eras, before we see this era come to a close?  Time will inform but history does not offer a favorable view.


The above data points do not offer a comforting view that the everyday household will be able to continue to indebt itself with X debt instrument(s) to assist with their economic participation while their price inflation adjusted wage levels are negative to minimally positive. 


The feedback loop to the broad economic system itself offers a concerning downstream landscape. 


As always though, timing is the question.  As it stands current day we are not in recession.  For our part we will continue to offer the proverbial economic tea leaves as the timeline unfolds in order to ascertain where this storyline is heading.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

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