Our whole society is absolutely drowning in debt at this stage, and the only way out is for the entire system to collapse.

On Tuesday, we learned that the total amount of credit card debt in the U.S. has now reached a new record high of 1.08 trillion dollars…

Americans now owe $1.08 trillion on their credit cards, according to a new report on household debt from the Federal Reserve Bank of New York.

Credit card balances spiked by $154 billion year over year, notching the largest increase since 1999, the New York Fed found.

“Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth,” said Donghoon Lee, the New York Fed’s economic research advisor.

Credit card debt has always been one of the most insidious forms of debt, but now the banks are pushing credit card interest rates to unprecedented heights…

The rise in credit card usage and debt is particularly concerning because interest rates are astronomically high right now. The average credit card annual percentage rate, or APR, hit a new record of 20.72% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in July 1991.

If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if you owe $5,000 in debt — which the average American does — current APR levels would mean it would take about 279 months and $8,124 in interest to pay off the debt making the minimum payments.

It should be illegal to issue a credit card that has an interest rate higher than 20 percent.

But banks are going to keep doing it because our politicians will not stop them.

So don’t fall into their trap.

Other forms of debt are rapidly growing as well…

Auto loan balances also contributed to the uptick, climbing by $13 billion over the course of the third quarter to $1.6 trillion. Student loan debt, meanwhile, increased by $30 billion while mortgage balances jumped by $126 billion to $12.14 trillion.

Overall, U.S. households are now more than 17 trillion dollars in debt.

I can’t even begin to describe how foolish we have been.

The only way to keep the party going is to borrow even more money, but thanks to higher interest rates we are not going to be able to purchase as much.

This is something that Kevin O’Leary pointed out in a recent interview…

“We’re looking at a downsized America. I tell it like it is,” O’Leary said on “The Big Money Show.” “Three years ago, even 24 months ago, you get a mortgage at 4.5%. You’re lucky to get one at eight today. So that means the size of the house you’re going to buy is 20 to 25% smaller. That’s a downsize.”

“You want to borrow for a car? Sorry, that’s 8 to 9%. Used to be five,” the O’Leary Ventures chairman added. “So, smaller, less expensive car. That’s happening at the same time.”

He is right.

But we just can’t help ourselves, and so we are going to continue to borrow more money.

The same thing is true for our corporations. Today, corporate debt is at the highest level ever recorded. And state and local governments continue to borrow money as if tomorrow will never come.

But the biggest offender of all is the federal government. The national debt is currently sitting at 33.6 trillion dollars, and it is constantly going higher. You can watch the national debt clock race upwards right here.  To me, that debt clock is actually a countdown to the financial destruction of America.

Once upon a time, I warned that the U.S. would be paying a trillion dollars in interest on the national debt by the year 2030. Well, guess what? We got there early. According to Bloomberg, we have already crossed that ominous threshold…

Estimated annualized interest payments on the US government debt pile climbed past $1 trillion at the end of last month, Bloomberg analysis shows. That projected amount has doubled in the past 19 months from the equivalent figure forecast around the time.

The estimated interest expense is calculated using US Treasury data which state the government’s monthly outstanding debt balances and the average interest it pays.

Wow.

As usual, things are even worse than many of us were originally projecting.

Before I end this article, there is one more thing that I wanted to mention.

The “glitch” that affected the direct deposit of so many paychecks all over the nation still has not been resolved five days later…

Federal Reserve officials are urging banks to work with customers hurt by ongoing deposit delays that have prevented some people from accessing their paychecks and other funds.

A number of customers still haven’t received their direct deposit paychecks following a “human error” that damaged the plumbing of America’s banking system. The deposit delays are linked to a problem that emerged on Friday with the Automated Clearing House (ACH) payments system, causing headaches for consumers and employers.

“The Federal Reserve encourages banks to work quickly to resolve issues for customers experiencing delays in receiving direct deposit payments as a result of operational issues at a private sector payments provider,” a Fed spokesman told CNN in a statement.

Was it really a “human error” that caused this?

If someone just hit a wrong button, you would think that would be relatively easy to fix. Keep a close eye on the banks.  As I discuss in my new book entitled “Chaos”, the banks are the beating heart of our economy and enormous trouble is brewing. Without healthy banks, our entire system will go haywire very rapidly.

We need to borrow money for just about every major purchase that we make, and it is the banks that make the vast majority of those loans. If the flow of credit starts to dry up, so will our standard of living. Unfortunately, a credit crunch has now begun, and that is going to have very serious implications for all of us.

Share your thoughts about this on our Economic Collapse Substack.

Michael’s new book entitled “Chaos” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Spreads on U.S. five-year credit default swaps widened to 62 basis points, according to data from S&P Global Market Intelligence. That’s up from a close of 59 basis points on Tuesday and more than double their level at the start of the year. It’s also the highest level since 2011, according to Refinitiv data.

The United States bumped up against its $31.4 trillion debt ceiling in January, leaving it to Congress to raise the cap and allow the government to keep paying its bills.

Democrats have insisted on legislation with no preconditions to raise the debt ceiling, while Republicans have demanded spending cuts in exchange for their support to lift the borrowing cap.

Until a debt ceiling deal is reached, the Treasury Department has resorted to so-called “extraordinary measures”—basically accounting maneuvers—that allow the government to continue making payments on its debt obligations. But at some point, these will run out.

Both Washington and Wall Street are focused on what’s known as the coming “X-date,” the moment at which Treasury will be unable to issue any more bills, bonds, or notes and can only make payments on its debt obligations from tax revenues.

While concerns about a possible U.S. sovereign debt default have been evident in bond markets for some time, stock market investors have been less fazed, with the S&P 500 rallying around 6 percent so far this year.

“The chances of U.S. default remain very, very slim,” said Guy Miller, chief market strategist at Zurich Insurance Group. “However, it just takes the probabilities to rise above zero and it becomes a real issue from an investor perspective.”

Still, the price action on U.S. five-year credit default swaps suggests investors are growing more jittery and trying to hedge against the prospect that negotiations around lifting the debt cap could come down to the wire—or fall through entirely.

‘Economic Catastrophe’

Yellen on Tuesday warned that failure by Congress to raise the government’s debt ceiling—and the resulting default—would trigger an “economic and financial catastrophe” that would decimate jobs and make borrowing money more expensive for years to come.

She said it was a “basic responsibility” of Congress to raise or abolish the $31.4 trillion borrowing cap, warning that a default on the country’s debt would raise the cost of borrowing “into perpetuity” and that “future investments would become substantially more costly.”

In the event of a default, American businesses would face deteriorating credit markets while the government would probably be unable to issue payments to military families and seniors who rely on Social Security, she warned.

“This economic catastrophe is preventable,” Yellen continued. “Congress must vote to raise or suspend the debt limit. It should do so without conditions. And it should not wait until the last minute.”

President Joe Biden has, in similar terms as Yellen, insisted on an unconditional lift of the debt cap.

“America is not a deadbeat nation,” Biden said at an event in Washington on Tuesday. “We pay our bills.”

Republicans have been seeking to tie spending cuts to their support for raising the borrowing limit.

As a basis for negotiations, House Republicans last week introduced legislation to raise the debt ceiling by $1.5 trillion while laying out a series of spending cuts amounting to roughly $4.5 trillion.

House Speaker Kevin McCarthy (R-Calif.) has been working to shore up support for the GOP proposal, called the Limit, Save, Grow Act of 2023.

McCarthy has hoped that passage of the Republican plan would drive Biden to the negotiating table, something that the president has refused to do.

“Remember what this bill is. This bill is to get us to the negotiating table. It’s not the final provisions,” McCarthy told reporters on Tuesday on Capitol Hill.

The Republicans’ 320-page bill calls for returning discretionary spending to 2022 levels, capping spending growth to 1 percent per year, and repealing certain tax credits.

Biden has expressed opposition to the GOP proposal and insisted on a clean bill with no preconditions on raising the debt cap.

Biden Threatens Veto

The House could vote on the GOP bill as early as Wednesday, though it’s unclear if it has enough support from Republicans to pass.

Several Republicans have expressed opposition to the bill, with some saying it doesn’t cut spending deeply enough while others worry about the impact on their constituents.

McCarthy can only afford to lose four votes from the Republicans’ slim 222–213 majority for the measure to clear the House.

The White House on Tuesday voiced its opposition to the GOP measure. In a Statement of Administration Policy (pdf) the White House called the Republican bill “a reckless attempt to extract extreme concessions as a condition for the United States simply paying the bills it has already incurred.”

“This legislation would not only risk default, recession, widespread job loss, and years of higher interest rates, but also make devastating cuts to programs that hard-working Americans and the middle-class count on,” the statement continued.

“Therefore, if the President were presented with the Limit, Save, Grow Act of 2023, he would veto it,” it added.

GOP Debt-Ceiling Plan

Besides decreasing Congress-approved annual spending to $1.47 trillion and capping spending growth at 1 percent annually over the next 10 years, the Republican plan features a series of other measures, including canceling Biden’s student loan forgiveness program.

The plan would also take back unspent COVID-19 relief funds, remove barriers to increased domestic energy production, and reimpose work requirements for many people collecting welfare.

It would also cancel the remaining money from the $5.2 trillion in COVID-19 relief programs Congress approved between 2020 and 2022. According to the White House, less than $80 billion of this remained unspent in January, with most of the money earmarked for union pension funds, veterans’ health care, and medical research.

Biden’s efforts to cancel around $400 billion in student debt are also on the chopping block. Republicans have argued that the student debt wipeout is unfair to those who didn’t rack up loans to go to college or who sacrificed to pay off their debts.

The plan would also repeal incentives for renewable energy, electric vehicles, and other supposedly green technologies that Democrats passed last year as part of the Inflation Reduction Act.

The proposal would also give Congress more power to review new rules put forward by the executive branch, potentially giving Republicans more power to block regulations they consider detrimental.

The package includes a fossil-fuel bill aimed at promoting energy development on federal lands, reducing regulations, and eliminating Democratic-backed climate incentives.

“If Washington wants to spend more, it will have to come together and find savings elsewhere, just like every household in America,” McCarthy said on the House floor last week.

“President Biden has a choice. Come to the table and stop playing partisan political games, or cover his ears, refuse to negotiate, and risk bumbling his way into the first default in our nation’s history,” McCarthy added.

Democrats have argued the Republican plan would bring an estimated 22 percent reduction in many social support programs.

“Default would be totally irresponsible,” Biden said Tuesday. “It would mean cuts in Social Security and Medicare, higher interest rates for your credit cards, car loans, mortgages.”

“The entire economy would [sic] put at risk.”

Article cross-posted from our premium news partners at The Epoch Times.