And, they say we’re credit card addicts. Forget that we can’t get any more credit and have no choice but to not spend, the outcome is the still the same. We’re now a nation of savers
CNNMoney.com: The government reported Thursday that household debt in the third quarter fell for the first time ever. Meanwhile, net worth dropped by the largest amount on record based on data going back to 1951.
Household debt fell by a seasonally adjusted $30 billion, or an annualized 0.8% in the third quarter to $13.91 trillion, according to the Federal Reserve’s flow of funds report.
Americans holding less debt may sound like a positive, but it also means consumers are spending less, as debt has become more expensive and harder to come by.
“Interest rates have shot rapidly higher in the last few months, and people are borrowing less because they don’t want expensive credit hanging over their heads,” said Michael Englund, chief economist for Action Economics. “The other component is the credit crunch, where qualified borrowers are unable to get credit.”
Debt mainly fell because more than a million Americans have lost their homes to foreclosure since the housing crisis hit in August 2007. When a home is foreclosed upon, the debt is transferred away from the homeowner to the bank. As a result, home mortgage debt sank a whopping 2.4% in the quarter.