US Consumer Debt and Bitcoin: Why Strong Spending Defies Market Logic

On the latest episode of Macro Markets, Cointelegraph analyst Marcel Pechman explains why United States consumption remains strong while auto-loan and credit card balance delinquency is accelerating. According to Pechman, consumers built a cushion of extra cash savings as the U.S. government injected money to avoid a recession and temporarily forgave student loan repayments.

But, according to investment bank JPMorgan, “consumers have spent down the entirety of their excess savings from the pandemic, which at one point totaled more than $2 trillion,” as reported by Business Insider. Pechman believes that if JPMorgan’s predictions are correct, the stock market should have been trading much lower. Still, Pechman doesn’t think that betting against the S&P 500 is sound advice, given that inflation is right around the corner and the government will be forced to inject liquidity to avoid a recession.

For the show’s next topic, Pechman dissects the Chinese central bank’s intervention after the yuan hit a 16-year low against the U.S. dollar. For Pechman, the biggest risk is the market doubting the country’s ability to sustain a stronger yuan, meaning betting that the People’s Bank of China’s reserves won’t be enough to sustain the desired level.

In essence, what the Chinese central bank is doing has limits and ultimately is a risky bet, argues Pechman. For now, according to the analyst, there seems to be no imminent risk coming from the yuan, but it is worth keeping an eye on.

For further insights into these matters, tune in to the latest episode of Macro Markets, exclusively available on the newly launched Cointelegraph Markets & Research YouTube channel.