Hello, good morning. This is Paula Pant from the Ford Anything Podcast. It's the first Friday of the month and it's the last first Friday of the month in 2022. Welcome to the December 1st Friday episode for those of you who are new to this podcast.

We are typically a weekly podcast. We air a new episode every Wednesday, but once a month on the first Friday of the month, we air a bonus episode.

We've just wrapped a special series that we did season one of Invest Anywhere. We've been airing that for the last several first Fridays.

But now we've come to the end of the year, closing out 2022 and it's been a while since I've talked to you directly.

And there's been a lot happening in all of our lives. A ton that's in the economic and business news, a ton that's happening behind the scenes with me.

So I thought that for this bonus episode, today's bonus episode, I break format a bit and share with you thoughts on what's happening out there in the economy as well as a glimpse behind the scenes of what's happening with me.

So again, this is not our usual format if you're a new listener or you're new to the community. Just know that this episode is not representative of what we usually do on our normal Wednesday episodes, every other episode we interview a guest and on the episodes in between we answer questions.

But the first Friday episodes are fun. They get to be experimental. We try new things. We try new formats. So let's give this a go. First, let's talk about what's happening in the headlines.

Total household debt climbed in the last quarter. This continues a trend of household debt increasing significantly.

Since the end of the pandemic, there's been a 15% year over year increase in credit card balances. And right now households have the largest aggregate credit card balance in more than 20 years.

The bulk of this rise in household debt is attributable to two factors. People have more mortgage debt. People have higher credit card balances. Auto loans on the personal balance sheet are climbing relative to where they used to be, but they don't comprise overall a large percentage of household debt, not in the way that mortgages and credit card balances do.

What does this mean? The fact that debt is climbing is this something to worry about? Are we in a consumer credit bubble? The good news is that despite the climbing debt, the total number of households overall that carry debt is not as big as it used to be.

And among those fewer households that do carry debt, they tend to be more credit worthy and have fewer delinquencies than previous areas that we've seen in the past.

Prior to the Great Recession, which was the last major credit bubble to pop with dire consequences. Prior to that, more households had debt and on balance, they were less qualified to be taking out those kinds of loans.

So that's the good news and the bad news.

Debt is climbing, but it's affecting fewer people and it's affecting those people who are best equipped to handle it. Now, one interesting piece of the puzzle that we have not yet seen how it will shake out is what's going to happen when the pause on student loan payments ends.

Student loan payments have been paused since the pandemic. They continue to be paused. And so all of those accounts are marked as current. They're marked as paid on time because no payments are due.

So how will that change once federal student loans need to be repaid again? Only time will tell. But there is some good news here as well.

Average student loan debt at graduation expressed in May 2021 dollars to keep it consistent for inflation. That average student loan debt has actually fallen between 2020 and 2021, which is the most recent year for which we have data.

We don't yet have 2020 numbers. So the average debt balance has fallen from 31,520 to 31,100 in 2021. It's a small shift, but it is directionally heading in the right place.

When adjusted for inflation, 2012 was the peak year for student debt at graduation. So both are immediate year-over-year numbers as well as across the past decade how we've been doing when adjusted for inflation.

The trajectory is slowly improving. That said, of course, the big student loan related issue that's dominated in headlines is the proposed debt forgiveness plan, which is currently being tested in the courts.

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