A reader’s fundamental takeaway on economic information released recently by the Federal Reserve Bank of New York (New York Fed) likely depends heavily on whether he or she is a diehard optimist or somewhat of a cynic.
The New York Fed’s report cites credit-report data from a wide national sampling, and what that information would seem to reveal foremost is that the national economy is picking up steam.
Perhaps ironically to some, though, that uptick in activity across many sectors of economic life is measured by an increase in borrowing, which is always problematic for some people.
That is especially true if a bona-fide recovery of significant magnitude fails to sustain itself and there is a backward slide reminiscent of what occurred in recent years. That retreat brought painful wounds that Americans from Florida to California will long remember, marked centrally by massive job losses, home foreclosure activity and bankruptcy filings by the millions and myriad other material dislocations.
The take of some commentators looking at the New York Fed’s report is upbeat despite the risks entailed by massive national borrowing. A common view is that the high levels of borrowing again being seen for home and vehicle purchases indicate growing consumer confidence and mark a welcome departure from the so-called “deleveraging” of recent years.
Time will of course tell. The United States is a nation historically marked by high levels of borrowing by both the nation and its residents. Although debt often fuels growth, it can occasionally become enough of a problem to undermine it, as well.
Source: Bloomberg, "Household borrowing rises most in six years in NY Fed report," Caroline Salas Gage, Feb. 18, 2014