Borrowed Time: U.S. Debt Bubble Still Building

Debt is becoming an increasingly worrisome component of the U.S. economy. Warnings about a growing debt bubble don't even tell the whole story. In reality, there are multiple debt bubbles, all growing to dangerous levels. First, household debt, which has reached a record high of well over a trillion dollars. Next, is corporate debt, which has nearly doubled in the last 15 years to nearly $14 trillion. On top of all that is the national government debt, now at $34 trillion and counting. Add all of those together and you have the recipe for disaster on the horizon, according to economists.

Richard Rosso, Houston-based investment advisor, is not an economist but is a financial expert who has seen the growing consumer debt problem. He chalks it up to the strong post-pandemic jobs market, which has spurred mass consumer spending. "I think most people feel, if I have a job, and I feel secure in my job, then I'll continue to take on debt and I'll be fine," he tells KTRH. "But sooner or later, the labor market is going to crack."

That crack in the labor market may already be starting, with the recent announcement of mass layoffs at UPS, Amazon, Google, and other major companies. "The UPS announcement should be a wake-up call, because there are going to be more companies doing that," says Rosso.

The corporate debt bubble is showing signs of bursting, with corporate defaults up by 80% last year. That is because more debt-saddled companies are now facing higher interest rates as balances come due. "If their debt is coming due and they have to refinance that debt, it's going to be at higher rates," says Rosso. "Which means they're going to have to let people go, or they're going to have to pay less."

While you can't control corporate or government debt, Rosso recommends getting a handle on your own debt before one of those other bubbles bursts. "Now is a good time to start looking at what your highest-interest debt is, and how do you work on aggressively paying it down," he says. "Because, unlike the U.S. government, we can't print our own money."