Debt Be Not Proud

The stock market went up today due in part to increased retail sales in May because Americans had in fact joyfully spent their economic stimulus checks. There had been some uncertainty that people would use them to pay down debt and not go out and spend them thus diluting the intended purpose. I was thinking that Americans now have an almost insurmountable wall of debt that they can no longer ignore and with the escalating food and gas prices, they simply couldn’t possibly consider spending that check when it arrived. Alas, I was wrong.

Consider some of the relevant data:

- The foreclosure rate has hit an all time record and shows no signs of abating as indicated by the record number of outstanding late payments.

- American’s equity in their homes has dropped to the lowest levels since World War II. This means that the amount of debt tied up in our homes is more than the amount of equity we have built up.

- The average family owes $9000 in credit card debt.

- The savings rate is now less than zero.

Yet, somehow, people still went out and spent that check. It gives me a headache just thinking about it. Granted, the economy does need a boost, though I am very concerned about it being propped up by consumer spending. Since the consumer has been borrowing and spending with, it appears, very little concern for how that debt will be repaid. Even when most Americans were given a little reprieve, a little something to put away for a rainy day, they spent it.