Looks like households have lots of fuel left to throw on inflation, if they’re in the mood.
By Wolf Richter for WOLF STREET.
What is the burden on households from servicing their debts and other financial obligations, in terms of their disposable income? That’s perhaps the most important debt measure, and the question we’re going to grapple with in a moment.
The pandemic-era policies left households flush with money, allowed them to catch up with past-dues, and allowed them to move delinquent debt into forbearance. They had free money by not having to make payments on mortgages, student loans, and rent. Then there were the PPP loans, over $800 billion of them. Delinquency rates, foreclosure rates, third-party collections, and bankruptcies all dropped to record lows. As a result, credit scores improved across the board. This was topped off by the blistering asset price inflation in stocks, bonds, real estate, cryptos, etc. But all of this is now getting more or less rapidly unwound.