Jim O’Neill Warns the Us May Be Too Dependent on Consumers, Like in 2008

via CNBC:

  • The U.S. economy is becoming “riskily dependent” on the “overleveraged consumer,” warns economist Jim O’Neill.
  • “It’s like, on some ways, like in 2008,” says the former chairman of Goldman Sachs Asset Management.
  • In the second quarter, U.S. consumer debt rose 1.4%, or $192 billion, to new highs of nearly $13.9 trillion.

The U.S. economy is becoming “riskily dependent” on the “overleveraged consumer,” economist Jim O’Neill warned Wednesday on CNBC, causing him to flash back to the last recession.

“It’s like, on some ways, like in 2008,” said the former chairman of Goldman Sachs Asset Management and current chair of Chatham House, an international affairs think tank.

In the second quarter, U.S. consumer debt rose 1.4%, or $192 billion, to nearly $13.9 trillion. That’s higher than the previous peak of about $12.7 trillion before the 2008 financial crisis, according to the New York Fed.

However, when compared with household worth, the debt is about half of what it was just before the current expansion began — 14.4% now compared with 27.4% in June 2009.

In a “Fast Money Halftime Report” interview, O’Neill said that economic strength depends on consumption, “which is fine unless financial conditions tighten unexpectedly” and indebted consumers “can’t keep up the consumption.”