CoreLogic’s Home Price Index shows that between October 2020 and October 2021, the price of the average US home went up 18%, which is the largest increase in 45 years. Like the UK, the mass take-up of homeworking has led to a ‘race for space,’ and the results have seen prices rocket. Often viewed as the main marker for consumer confidence, an over-bloated housing market could be the first bubble to burst. Then there’s the housing crisis to consider. With inflation rocketing, a cost-of-living crisis could be about to hit America’s middle class soon. Meanwhile, the Consumer Confidence Index decreased in November, from 111.6 points in October to 109.5 in November. This means the typical US graduate is accruing $1,740 of interest each year, with compound interest on top. The average debt per graduate is $30,000, while the average interest rate is 5.8%. And the Student Debt Crisis Centre has found that 89% of US graduates are not financially secure enough to restart payments next year. With the US system, the debt is treated like commercial debt and must be paid regardless of income. However, one key advantage over the US system is that there are no repayments due if a graduate’s income remains below the repayment threshold. Median-earning graduates pay back more money over their working lives, compared to higher and lower earners. The UK system is unfair to some graduates.

While this can amount to a significant sum over a lifetime of repayments, their burden pales in comparison with the debt facing US graduates, who together owe a whopping $1.86 trillion. In the UK, plan 2 graduates currently pay back 9% of any income earned over £27,295pa towards their student loans. The moratorium on student loan payments, collections and interest, which was introduced at the beginning of the pandemic, is coming to an end on 31 January 2022. But for 44.7 million Americans, there’s a bigger problem about to hit their personal finances. US inflation is at its highest level since 1982. While it is expected to end by mid-2022, a faster taper along with a rate rise could be the catalyst for a market crash. The program has already added $4.5 trillion to the Reserve’s balance sheet. Federal Reserve Chair Jerome Powell recently said it is time to ‘retire’ the word ‘transitory’ to describe inflation, paving the way to increase the ‘tapering’ of the US’s quantitative easing program, and potentially raise the base rate in 2022. And this is precisely the quandary the US’s Federal Reserve finds itself in. However, this makes debt more expensive, restricting the ability of companies to grow. However, the problem is that inflation in November hit 6.8% according to the US Consumer Prices Index.Īnd in times of high inflation, a central bank’s most powerful tool is to raise the currency’s base interest rate. In 2020, GDP fell by 3.5%, the first time it’s fallen since the credit crunch of 2009. GDP growth slowed from 6.7% in Q2 2021, to 2.1% in Q3, ‘led by a slowdown in consumer spending. And in the long run, that could make the situation worse if the bubble eventually bursts. But as the economic damage would be disastrous, the Federal Reserve will delay the pop as much as possible. Either assets will plateau for a significant length of time, allowing wages and the real economy to catch up. This ‘bubble of everything’ can only end in one of two ways.

But in the USA, it appears that the situation could be about to get markedly worse. And this hyper-relaxed monetary policy has seen every asset class bubble up, across the UK, Euro Zone, Australia, and New Zealand. Interest rates, already low, were reduced to just above 0%. Governments panicked and turned on the quantitative easing taps. The month of March 2020 saw each of these internationally tracked indexes lose around 30% of their value. Whether it was the FTSE 100, S&P 500, the DAX, S&P ASX 200, the CAC 40, they were all hit the same. Across the western world, the inflation rate is at a multi-decade high.Īt the onset of the Covid-19 pandemic, stock markets collapsed. Central banks are starting to accept that inflation is not temporary, but a long-term problem that needs to be addressed.

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