American consumers owe less and are paying their bills on time more, the New York Federal Reserve said in a report released Wednesday. The results certainly sound cheery, but debt data is notoriously subject to interpretation. What’s true for you is also true for the country: Some debt is good, other debt is bad, no debt is even worse, but too much debt is really, really bad. As we’ll see, the housing market recovery makes this data look better than it actually is, and a continuing rise in student loan debt still threatens the health of the economy.
Debt is neither good nor bad, it’s a tool. Gradual upticks in borrowing, accompanied by signs that consumers are repaying, is a great sign for the economy. But don’t be fooled by lower overall household debt numbers, made rosy by the inevitable housing recovery. So long as young Americans live under a rock of debt and are prevented from living as normal, 20-something consumers, the economy’s long-term health is in peril.
Let’s unpack the Fed’s report. See the full story on Credit.com