by Wolf Richter
During the Financial Crisis, consumers deleveraged by walking away from their debts. And now, with 20 million people still claiming unemployment insurance?
During the Financial Crisis, credit card debt and home mortgages blew up spectacularly. When it was all said and done, about three years later, total credit card debt and home mortgage debt had plunged, not because consumers had paid them off but because consumers had defaulted on them and had walked away from their debts.
Now, at this stage of the Pandemic, 9 million people, according to the Bureau of Labor Statistics, and 20 million people, according to unemployment insurance claims, have lost their jobs. With these kinds of numbers, you’d expect consumer credit to blow up even more spectacularly than it had during the Financial Crisis. But the opposite happened.