IN HIS State of the Union address last week, US president Donald Trump boasted that under his leadership the American economy had undergone a miraculous recovery saying: ‘In just over two years since the election, we have launched an unprecedented economic boom’, adding: ‘An economic miracle is taking place in the United States.’
What Trump left out in his speech was the fact that this ‘economic miracle’ is based entirely on US capitalism running up unprecedented levels of debt – both personal and corporate.
This was revealed on Tuesday in a report by the Federal Reserve Bank which showed that the overall debt of US citizens now stands at a record $13.5 trillion.
The majority of this household debt is mortgage debt, but significantly this is declining while other borrowing is increasing as US workers are forced to take on debt to survive.
Credit card debt stands at $870 billion – a figure last reached just before the banking crash in 2008.
In a sign that US workers are having to draw back from consumer spending, the actual number of people applying for credit cards has dropped to the lowest level ever recorded while the number of people defaulting on credit card loans or closing their accounts completely has risen by 5%.
Over 9% of the total $1.5 trillion in student loans is now considered ‘delinquent’. The delinquency rates for auto loans are increasing, leading one specialist to say: ‘Growing delinquencies among subprime borrowers are responsible for this deteriorating performance and younger borrowers are struggling most acutely to afford their auto loans.’
While US workers and youth struggle under the weight of debt, the US national debt has reached epic proportions. US national debt for the first time stands at $22.012 trillion, an increase of more than $30 billion this month alone. This debt has grown by $2 trillion since January 2017.
The interest alone paid by the US government on this mountain of debt will exceed the amount of federal spending on every child in the US and this debt is growing by the day. This debt was vastly increased by Trump when he brought in tax cuts of $1.5 trillion for the rich, the banks and companies.
Trump boasted at the time this would put an extra $4,000 in the pockets of middle-class families while in reality it increased the pay of workers by just 2 cents an hour. The average US worker earns less today than they did 43 years ago after inflation is taken into account.
One of Trump’s election pledges back in 2016 was that he would get rid of the US debt over the next 8 years – instead it has swelled to unsustainable proportions.
In 2007/8, it was the subprime mortgage crisis in the US that brought the world’s banking system to the brink of collapse, a collapse only postponed by central banks pumping trillions of ‘free’ money into their vaults under Quantitative Easing programmes.
Today, it is not just subprime mortgages but subprime student, credit card and auto debt that have been piled up on a working class that is forced to live in debt as its wages and jobs have been destroyed by a bankrupt capitalist system.
As in 2007/8, all these debts have been parcelled up as ‘assets’ by the banks and sold on to speculators and other banks and when they become ‘delinquent’ it sets off a chain reaction of financial crash that extends across the entire world banking system.
The great fear of the ruling class is that already the working class across the world are rising up against the austerity imposed to bail-out the banks and that the even more catastrophic crash taking place will be met with a revolutionary response from workers and youth.
What is clear is that capitalism in its final death agony can only stagger on through massive debt and when that debt pile collapses it must make the working class pay through a brutal class war to impose the banks’ crisis on their backs.
The only answer to capitalist crisis for the working class is through putting an end to this bankrupt capitalist system with the victory of the world socialist revolution!