Charts that Count: will Covid-19 light the fuse on a debt bomb?

Synopsis

In the last financial crisis, household debt was central to the turmoil, driven by bad US mortgages and mortgage securitization. Currently, the COVID-19 pandemic triggers a different type of crisis, yet the $14.3 trillion in U.S. household debt poses a significant risk. With 36 million new jobless claims since the onset of the virus, potential defaults and bankruptcies could have global repercussions. However, the U.S. government has injected billions into the economy, providing direct payments to households and enhancing unemployment benefits. Over the past decade, Americans have reduced household debt relative to income, with interest payments at historic lows. Despite this, the reduction in debt is primarily in mortgages, while credit card and auto loan debts remain high. Delinquencies on these loans were already increasing before the pandemic, particularly affecting hourly workers in industries like hotels and restaurants, who may not own homes and are now facing job losses.