Debt
Chart: One Reason a Brexit Makes Sense
Chart: One Reason a Brexit Makes Sense
The UK escapes a swath of troubled loans and fiscal problems.
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Economic authorities and pundits have been vocal about the potential economic consequences of a Brexit.
The Bank of England said a “Leave” vote would increase unemployment, stoke inflation, slow economic growth, and prompt consumers and businesses to delay spending. The results would be recessionary.
The IMF warned that leaving the EU would cause “severe regional and global damage” for years to come.
The main argument here is that a lack of access to the single market will hurt the UK economy, and this could prove to be very true in time.
Market, Schmarket
While keeping economic ties to the single market is an important point to consider, the UK also gains a distinct advantage from maintaining a further distance from parts of the EU ecosystem.
Why? Because parts of Europe are still an economic mess, and things aren’t getting better. Just look to the recent banking mess in Italy and non-performing loans (NPLs) as an example.
Historical NPLs (Data from IMF)
Italian banks are currently being crushed by €360 billion in non-performing loans. According to the European Banking Authority, they make up 16.9% of all lending as of March 2016, and are unlikely to be paid in full. As a result, bank stock prices in Italy have plummeted.
Banca Monte dei Paschi di Siena, Italy’s third-largest bank by assets, is now trading for €0.31, which is a mere 15% of its 52-week highs at €2.04. UniCredit, the country’s largest bank with just under €1 trillion in assets, is trading at one-third of what it was worth a year ago.
To help solve the disaster, the ECB’s Mario Draghi is now backing a public bailout of Italy’s banking sector.
Outside of Italy
Portugal has a similar banking crisis brewing. Non-performing loans have mounted to 18.5%, and Prime Minister Antonio Costa is also publicly looking for a solution to help Portuguese banks.
Even Germany, which is typically rock-solid, has its own banking issues. As we covered a couple of weeks ago, the country’s largest bank, Deutsche Bank, has seen its value collapse as it has been engulfed by scandals, record losses, missed stress tests, and poor planning.
While access to markets is important for the UK, keeping a distance from flailing European banks also seems like it could be a wise choice in the long run as well.
Money
The Growing Auto Loan Problem Facing Young Americans
After a borrowing spree during COVID-19, younger Americans are struggling to keep up with their auto loan payments.

The Growing Auto Loan Problem Facing Young Americans
Since the COVID-19 pandemic, Americans have taken on significantly more debt to buy vehicles. This is especially true for Gen Z and Millennials, who the Federal Reserve believes may have borrowed beyond their means.
In this infographic, we’ve visualized data from the Fed’s most recent consumer debt update.
Aggressive Borrowing
The first chart in this graphic shows the growth in outstanding car loans between Q2 2020 (start of the pandemic) to Q4 2022 (latest available).
Age | Growth in outstanding car loans |
---|---|
18-29 | 31% |
30-39 | 29% |
40-49 | 23% |
50-59 | 14% |
60-69 | 11% |
70+ | 11% |
We can see that Americans under the age of 40 have grown their vehicle-related debt the most. It’s natural for Gen Z (ages 11-26) to have higher growth figures because many of them are buying their first car, but 31% is quite high relatively speaking.
Part of this can be attributed to today’s inflationary environment, which has pushed used car prices to new highs. Supply chain issues have also resulted in over 30% of new cars being sold above MSRP.
Because of these rising prices, the Fed reports that the average auto loan is now $24,000, up 41% from 2019’s value of $17,000.
Spiking Delinquencies
Interest rates on auto loans are typically fixed, meaning many young Americans were able to take advantage of the low rates seen during the pandemic.
Despite this, one in five Gen Zs say that their car payments account for over 20% of their after-tax income.
Shown in the second chart of this infographic, the amount of auto debt transitioning into serious delinquency is much higher for Gen Z and Millennials. Throughout 2022, these generations saw $20 billion in auto debt fall 90+ days behind.
The outlook for these struggling borrowers is bleak. First there’s inflation, which has pushed up the prices of most consumer goods. This eats into their ability to make car payments.
Second is rising interest rates, which make credit card debt—another pain point for young borrowers—even more costly. Finally, there’s student loans, which are expected to resume in summer 2023. Payments on student debt have been suspended since the beginning of the COVID-19 pandemic.
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