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It lifted rates by a quarter point to 5%, its first change in 17 months, in an effort to rein in consumer debt and soaring house prices.
First, an increase in consumer debt has helped increase consumption.
Education debt ranks second in consumer debt nationwide behind mortgages.
Today, Americans carry $2.56 trillion in consumer debt, up 22percentt since 2000 alone, according to the Federal Reserve Board.
But behind the big increase in consumer debt is a major shift in the way lenders approach their business.
The Debt Trap: This series is examining the surge in consumer debt and the lenders who made it possible.
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The couple have filed for bankruptcy protection, asking a federal court to wipe out close to $60,000 in consumer debts.
[C16.] Consumer Borrowing Surges in U.S. Consumer debt surged in December for the second consecutive month, fueled by holiday spending and capping a year that had the fastest pace of borrowing since 1996, Federal Reserve figures showed.
So the downward march in the personal savings rate is closely linked to the upward march in total consumer debt (mortgage, credit card, auto, etc). in relation to disposable income (see chart below).
[C11.] Consumer Debt Jumped in August Consumer debt rose 5.2percentt, or $8.2 billion, in August, the Federal Reserve said.
It is clear that the United States has made a lot more progress in cutting consumer debt than has been made in either Britain or Spain, two other countries that suffered from falling real estate prices.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com