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Would You Like a Loan with Your Burger?

Would You Like a Loan with Your Burger?

March 13, 2024

A receipt went viral recently when both traditional and social media reacted to 'out of control prices' for a burger, fries, and a small drink. The receipt was posted on X and has been viewed more than 25 million times. It showed that the cost for a bacon cheeseburger was $12.49, a small soda was $2.89, and small fries were $5.19. This totaled $21.91 with tax and the final amount as $24.10 with a tip (because I am sure that we all remember tipping the person taking our order at (insert childhood fast food restaurant here).

                                                                                                  Source: Reddit                                                                                  Source: Wall Street Silver/X 

One of the biggest sources of financial stress families have been dealing with in the aftermath of the COVID-19, coronavirus pandemic and the resulting fiscal and monetary stimulus that sent prices skyrocketing over the last couple of years has been the rising cost of food, both in grocery stores and in restaurants. This is not an illusion.

As you will see from our first chart below, the cost of food at home steadily declined from the early 1960s until the turn of the century. It continued to decline over the last twenty years, while the cost of food away from home rose very slowly for decades. Both moved higher in the wake of the pandemic. WHY?

Better farming and production methods seem to have led to a decline in overall grocery costs from 1960 to 2000. However, we must remember that other factors are at play when we consider food away from home. This includes additional labor, advertising, and overhead expenses related to running a restaurant.

While the total cost of food as a percentage of disposable income has only risen from 10% to 11% over the last couple of years, when multiplied by millions of families across the country, this can be a substantial amount of money. The cumulative impact of this is causing financial stress, especially for those at the lower end of the wage and income spectrum.

At the same time, recent headlines have shown that credit card debt has reached an all-time high. According to a recent Federal Reserve Bank of New York report, total household debt reached $17.5 trillion at the end of the fourth quarter of 2023. Credit card balances rose by $50 billion and stand at a record $1.13 trillion. According to the New York Fed, “Delinquency transition rates increased for all debt types except for student loans” (I wonder why that may be?).

As you can see in our final chart today, the cost of living and the cumulative amount of debt are raising delinquencies on credit card and auto loan accounts significantly.

As you can see above, the last time we saw delinquencies for this type of debt at these levels was during the aftermath of the Great Financial Crisis. All this points towards an increasingly bifurcated U.S. financial picture. On the one hand, you have low unemployment, rising wages, rising 401K values, and increasing home prices for those lucky enough to buy before the pandemic and lock in historically low mortgage rates.

On the other hand, we have people who are struggling with wages which have largely not kept up with price increases over the last four years. Many people have been priced out of the housing market due to rising home prices and mortgage rates. At the same time, many of these same individuals and families barely make enough income to make ends meet and are not saving aggressively for their future retirement needs, which will create additional issues down the road.

These are important issues that need to be dealt with in a fair and rational way. Forgive my cynicism, but I don't have great hope that our political class on either side of the aisle on Capitol Hill will address them meaningfully, especially during an election year.

While it may only feel like you need a loan to buy a burger, as illustrated above, this is more than just a feeling for many Americans. The CFPs of Impel Wealth Management will continue to do our best to keep you informed of important topics and context as we continue “Moving Life Forward.”

© 2024 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot directly invest in indices.

Featured blog image source: Charkin