Jan 29, 2021
In the U.S., income exploded last year. It was the best year for income in American history by far, but I’m not discounting Americans who lost their business. Also, debt affordability has never been better in modern history. Americans still hold a lot of debt, but a big question is can you afford the debt.
Back in 1930, the U.S. Treasury secretary said liquidate labor, stocks, farmers, real estate, purge the rottenest out of the system, and high costs of living will come down. Enterprising people will pick up the wrecks from less competent people. That's how it was until 2020 when the stimulus was born.
We need to be aware that in our country, our economic activity is all about spending. Our base growth comes down to a most basic component of how do we spend. Consumer and business spending makes up 87% of our U.S. economy.
Getting money into the hands of people is a good thing, but once people get money, it doesn’t mean they want to give it up.
Another thing to look at is mortgage payments. Before 2008, the percentage of income going to mortgages was about 8%. Now, it has declined to a generational low of 4%. We’re also seeing student debt and auto loans rising at the slowest rate in 10 years.
As income surged, debt fell dramatically and savings exploded. The American consumer is in the best financial shape in history.
Check out the full episode to hear Nancy discuss these topics. Use the timestamps below to hear a specific segment.
1:10 – We used to handle recessions differently
2:23 – How we spend
4:45 – Debt affordability
6:21 – Cash in banks
7:03 – More money in checking accounts
12:00 – The American consumer
15:06 – Asset allocation and business cycles
18:20 – Bonds and cash
19:38 – Innovation
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