SUBPRIME LOANS STEER THE AUTO INDUSTRY

As reported in the Trends Journal over the past few months, the world auto market is in decline.

Even the U.S., whose economy and currency appear solid in comparison to most in the global economy, the auto-market slowdown is hitting home.

Stage 1: Delinquent U.S. auto loans (loans that are at least 90 days late) are on the rise, particularly for the subprime car loan market, the riskiest types of car loans. 

According to the New York Fed, $1.3 trillion of U.S. auto debt was outstanding in the third quarter of 2019, after $1.59 billion of originations during the second quarter. 

Of the $1.3 trillion outstanding auto debt, 4.8 percent, or approximately $62 billion, is seriously delinquent, up from 3.1 percent five years ago. (During the financial crisis, the peak was 5.2 percent.)

TRENDPOST: The Federal Reserve Bank of New York said that consumer loans more than 90 days late, classified as seriously delinquent, have risen steadily.

Corporate, governmental, and household debt has exploded not just in the U.S. but throughout the world, and the debt the entire world holds has tripled in the last 20 years. 

Not only are delinquency rates rising in subprime auto loans but so are subprime credit card loans. 

According to the Federal Reserve, delinquency rates for subprime credit card loans in the third quarter of this year rose to 6.35 percent, which is higher than it was during the Panic of ’08. For reference, the delinquency rate in 2016 was around 3 percent. 

Similar to the subprime real estate market before it crashed, subprime auto and credit and loans are booming likely because of the low income and credit ratings of its borrowers.

TREND FORECAST: There is nothing in the geopolitical/socioeconomic future currently being directed by Big Business and national governments that will reverse these data-supported negative trends.

They’ve dried up monetary stimulus, and, as forecast, their new fiscal stimulus programs, unlike the monetary ones that injected scores of trillions into the financial sector, will do little or nothing to boost sinking GDPs.