Is a Recession Impossible Today?

Added: 2026-05-11

[00:00:00]What I'm about to say is going to be deeply unpopular for the bears out there. But there is a chance that it might actually be impossible for us to have a great financial crisis level of recession, especially depression, economic crash, or collapse from the levels we are at right now. And I'm going to show you why. But first, if that makes you feel a little bit upset on the inside, maybe you need to check why. Because really, if what I'm going to show you today is true, then it is good news. And good news about good times being ahead should not be something that makes us upset. Unless you're positioned in a way where you can only profit if everything gets really bad, then maybe you need a check. So, we all have seen this chart, which is the total debt balance in the United States, specifically with households. This is not corporate debt. This is not the national debt. This is US households.

[00:00:58]We've got two main sections to this chart. We've got the red line on top, which is non-housing debt. We've got the blue line on bottom, which is housing debt. And outside of the brief period of time from 2008 through 2012, where these were trending down, for the most part, US household debt has only ever really increased. What you'll also notice is that from 2021 through about 2022, household debt really grew pretty quickly. But the trend has kind of normalized since then and it is not growing as quickly now. It's a little bit more on trend compared to what it was before that. Now this makes sense given the fact that 2020 and 2021 were times of unprecedented cheap debt. And it meant that most people could borrow for things like houses, cars, personal loans at interest rates that were well below historical norms, which allowed people to lever up in a way that didn't actually cost them that much more money on a month-to-month basis. Now, let's break it down by looking at non-housing debt alone. And we can see this red chart on top is student debt. And that has continued to chug along higher. And we're now sitting as of the end of 2025, we're sitting at 1.66 66 trillion. And this is the most recent data we have.

[00:02:10]Obviously, I'm recording this in May of 2026. We're just waiting for the updated data to come out for this. This next section here in the gray area is other debt, which is going to be things like personal loans. And that's up to.56 trillion. Obviously, the smallest of the bunch. The next section of the chart is the orange one. This is credit card debt, which is up to $1.28 trillion nationwide across all US households. And the bottom is the green section which is auto loans which is up to 1.67 trillion basically neck andneck tied with student loans. Now the problem with just looking at household debt is it doesn't really tell you much on its own. We always have to ask the question compared to what? So the first useful thing to look at when we're trying to assess whether this is a crazy amount of debt or not is to look at delinquencies. Now, this is a chart that shows the percent of balance 90 plus days delinquent on these different items of non-household debt. And you can see that since 2022, delinquency on credit card debt has started to really increase. It's now sitting above 12%, almost 13%. You can see since that same time frame, delinquency on other forms of debt has also been climbing.

[00:03:21]Delinquency on autoloan debt has also been climbing. It's now sitting above 5%. and home equity lines of credit kind of just moved along sideways as well as mortgage debt has kind of just moved along sideways. Really, really low levels of delinquency there. But over the last couple of years, since 2022, it is clear that delinquency, 90-day plus delinquency on household debt has been increasing. But when in doubt, zoom out.

[00:03:43]Look at the rest of this chart. Yes, student loans have spiked up like crazy, but look at where they were before 2020.

[00:03:51]They were consistently for years in this 11 10 to 11 to 12% range. And right now they're not even above 10%. So yes, there's been a spike, but it's not back up to historical norms. Auto loans sitting at 5%, that's on par where it was before 2020. A little bit higher where it was back in like the 2015 2016 area, right along where it was in like 2010. Other debt, yes, it's been trending up for the last couple years, but really not much of a difference compared to its historical normal range.

[00:04:19]And same thing with credit card debt. By and large, across the board, these delinquency rates move up and down, but we're not seeing everything significantly higher than where it used to be. When we look back at the data going back to 2004, if delinquency rates were spiking to way higher than historical norms when we look back at a 20-year time frame, then that would probably be concerning. uh when we just see an increase compared to where it was when interest rates were zero and where delinquency and defaults on a lot of debt were being rolled over, forgiven, postponed, delayed. Obviously, we're going to see an increase from there, but we're just getting back to normal historical ranges now. So, really, there's not a cause for alarm there.

[00:04:58]Now, I'm going to show you something that is even crazier. Obviously, credit card debt is increasing. We have credit card debt sitting at about 1.28 trillion. That's like credit card balances. That is something that is held on somebody's credit card from one month to the next that they are paying interest on. But I bet you didn't know that the median household's credit card balance is zero.

[00:05:23]That's right. So even though credit card debt in America across households is a total of $1.28 28 trillion. If you stack up and line up every single household in America, from the households who have zero debt to the households who have the most credit card debt, the household that's directly in the middle of that list has zero debt. Zero credit card debt, I should say. The median household has no credit card debt whatsoever. Yes, they might use probably use their credit cards, but they pay them off in full every single month. And that is because only 47% of US households actually carry a credit card balance. So about 53% of American households, even though most of them use credit cards, they do not carry a balance from month to month. Which means all of that credit card debt, the 1.28 trillion that you see there, is all held by less than half of American households. Close to half, but still less. Now, about one in five of these credit card balance holders don't think that they'll ever be able to pay it off, or at least that's what they say in the surveys, which don't get me wrong, is terrible. That is a crisis for those households and it is something that everybody should have as their top priority is getting out of bad debt like credit card debt if that's the situation you're in. But it is a problem that is relatively concentrated among fewer US households. This is not indicative of the health of the average normal US household, the typical US household across America. The typical US household is in a much better financial position.

[00:06:53]And if you want to know just how much better of a position the typical US household is in, we need to also ask the question compared to what? What if we take a look at debt compared to assets?

[00:07:06]And it turns out that the debt to asset ratio for US households is at a 50year low. Going back half a century, US households have never been in as good of a position as they are right now when you compare their assets versus their liabilities. For 40 years straight, this ratio got worse and worse and worse.

[00:07:29]American households continued to increase the amount of debt that they had, even compared to their assets that they held. Obviously, this ratio spiked and peaked, triggering the great financial crisis in 2008 and 2009. This gets to the heart of what actually causes busts because busts are not caused by a business cycle. Busts are caused by a debt cycle. Essentially, what you have is an expansion of credit which increases monetary aggregates. So there's more fake money that's been loaned into existence flowing around the system and more and more liabilities that have been stacked up along the way.

[00:08:06]Everybody gets overleveraged because they borrow, they pay, they borrow, they pay. That payment that they make becomes somebody else's asset and income and it keeps on going and everybody's leverage gets built up to their eyeballs and it cannot keep going forever. At some point somebody starts to delever or at some point somebody defaults and then that income that the next person in line was expecting they're no longer able to get it and the process starts to reverse itself and unwind sometimes violently.

[00:08:33]Often times these booms and then busts are very small and they result in these small peaks and then small troughs. But every once in a while the whole system builds up so much leverage that unwinds violently all at once. And that is exactly what happened in the Great Financial Crisis. That's also what happened during the Great Depression.

[00:08:52]Just so you know, it was a problem of too much leverage built on too much easy credit. Now, the reason it lasted so long was because of disastrous monetary and fiscal policy, but that's a story for another time. The fact of the matter is busts are made inevitable by the booms fueled by easy credit policies that precede them. The boom makes the bust inevitable. That also means without the boom, it's very difficult, if not impossible, to see the bust. And right now with US debt to asset ratios for households being at the lowest level they've been in 50 years I am suggesting that it is going to be very difficult to see the type of economic collapse to see the type of recession to see the type of depression that many people maybe even want because they want to feel vindicated about not investing this whole time about staying in cash and they're waiting for a repeat of what happened during the great recession. So this time they can be prepared and buy assets on sale. But nobody is leveraged enough. Nobody has enough debt up to their eyeballs to force the entire system to unwind at the same time.

[00:09:59]Forcing everybody to come for sellers, letting things go on sale for fire cell prices and people losing everything because the prices didn't reflect reality. They just reflect too much leverage built up in the system. It is very difficult, if not impossible, to have a massive economic crisis when the typical US household just carries almost no debt compared to their assets. And part of the reason we're in this situation right now, this situation where most US households have very healthy balance sheets, is because so many American households were so scarred from the Great Recession. This experience here of Gen X losing everything and millennials watching their parents lose everything and everybody knowing it was because of too much debt. It was because of variable rate debt. It was because of overlever.

[00:10:45]The majority of US households are completely terrified of debt. And so to the extent that most and not everybody but to the extent that most US households have debt, it is a very manageable amount. Now assets are not the only thing we need to compare debt to. We also need to compare it to the money supply. Yes, it is true that the total household debt just continues to grow. But it is also true that the total US money supply continues to grow because of the devaluation of the dollar that happens along the way. The real cost or the real level of that debt is not as extreme as it looks if you just look at the dollar amount. And this becomes apparent when we look at real median household income in the United States. Real means it is adjusted for inflation. Is it adjusted for inflation perfectly? No, because it's adjusted with the CPI, but it's still adjusted somewhat. We're not looking at a nominal number here. You can see that by and large, this number goes up. And by the way, it did go down after the financial crisis. And by the way, it did go down after 2019, but it is on its way back up again. And this number trends up over time, which means that even though the total US household debt goes up over time, that doesn't necessarily mean that US households are becoming more overleveraged because their income is going up enough to be able to afford that debt. And we know this is true because US household debt to asset ratio is getting better. I am not making the case that there are not some households that are hurting. I know there are. But I am making the case is that that headline is a lot more popular than hey most people are actually doing okay and so it doesn't make the news. Yes, some people are hurting but it is very unlikely at this point that it is so widespread that we are at the tipping point or at the brink of a large widescale economic collapse. In order to have that, you need to have a massive amount of leverage in the system that is going to be forced to be unwound when the deflation hits, when the deleveraging hits, when the defaults start. And because the rising tide of the money supply lifting all boats has made the service of this growing household debt manageable and despite the inflation, the median, not the average, so this is not mean. This is not skewed by the highest income earners. This is median. Median household income has continued to increase. And so the asset to debt ratio for most households has drastically improved. We just don't have the leverage in the system built up to see a massive unwind, which is what you need to experience a bust because the bust happens from the boom that preceded it.

[00:13:19]And we have not seen a boom, which is a large unreasonable, unrealistic increase in prices across the board from everybody becoming overleveraged. That is not happening right now. The data does not support that. So, if you're a perma bear, unfortunately, I'm sorry.

[00:13:36]This probably doesn't fit your narrative. And by the way, I'm also not saying that a recession right now in general is impossible. I'm just saying it is very, very, very, very unlikely that we see a very severe economic collapse, something on par with the financial crisis that we saw in 2008, 2009. And it's worth reiterating, it's not that I think that there are not households that are experiencing economic pain right now. I know there are and I know the government is incredibly overleveraged, but they have the privilege of being able to print whatever necessary money they need in order to afford their expenses. US households don't have that privilege, but as far as right now goes, it doesn't look like they would need it anyway.

[00:14:18]Household balance sheets are in a very good position. So, at least for now, it's probably not going to be a profitable endeavor to bet on the collapse of the US economy. And I know some of you hope I'm wrong about this, but for your sake and for all of ours, I hope I'm right. And I think I am. As always, thank you so much for watching.

[00:14:36]Hope you enjoyed some good news today.

[00:14:38]And have a great day.