US economy ‘death spiral’ - Warning issued by top economist over devastating impact for families
US economy ‘death spiral’ - Warning issued by top economist over devastating impact for families
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American families are hurtling towards a personal finance “death spiral” as inflation under Joe Biden’s administration continues to run rampant, GB News understands.
In a wide-ranging interview on the state of the US economy, EJ Antoni, a research fellow at the Heritage Foundation focusing on fiscal and monetary policy, warned families could be left devastated.
A “death spiral” occurs when consumers fall into debt with most payments going towards interest payments.
On occasion, people are forced to take out new loans simply to pay off existing debts.
WATCH NOW: US economist warns families entering 'death spiral'
“Sadly, a lot of American families are already in that [death spiral] position because unfortunately, inflation outpaced wages so fast during the Biden administration, a record 26 consecutive months,” Antoni told GB News.
“When you look at annual earnings increases compared to annual inflation, many families were forced to make ends meet by utilizing credit cards and going into debt.
“The result of that was record credit card balances of over a trillion dollars at the same time that interest rates on those credit cards have hit record highs.
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Inflation under Joe Biden’s administration continues to run rampant
Reuters“So families who previously were unable to pay back their finance charges and their balances are now especially unable to do so because the financing charges have gone up, even if they haven't actually put any more onto those credit card balances.
“That's where you get into that death spiral where the amount of money accruing and finance charges alone exceeds what a family can actually pay towards that card.
“It works like a mortgage, but in reverse.”
Data released this year has shown that credit card debt in the US hit a record-breaking $1trillion (£820billion).
Critics warned the debt was indicative of America’s unsustainable spending habits while personal savings plunged to new lows
ReutersCritics warned the debt was indicative of America’s unsustainable spending habits while personal savings plunged to new lows.
Despite the overwhelming figure economists tend to agree that the eye-watering bill is a drop in the pond compared to other asset bubbles.
Antoni continued: “We are seeing delinquencies [on loans] rise at an incredibly fast pace.
“I think the only reason why it's not sounding more alarm bells is that we are coming from an incredibly low level of defaults.”