Debt and Recession: Is Rising Debt the Canary in the Coal Mine?

• Rising debt levels and delinquency rates are reaching levels not seen in years, signaling worsening household financial stability.
• The US national debt has reached nearly $39 trillion, creating concern that debt-fueled fiscal policy could precipitate a financial crisis or worsening inflation.
• Most Americans are facing financial uncertainty and fear recession, which is helping push a drive to safe haven assets like gold and silver.

One way to judge the financial health of an individual, a company, or a country is by looking at the levels of debt they have. The higher the level of debt, the shakier their financial position often is.

Of course, that has to be tempered sometimes by looking at income as well, which is what lenders do when looking at debt to income ratios, or what financial analysts do when looking at balance sheets of companies they’re looking to buy.

In general, though, rising levels of debt, particularly when debt is rising faster than income, are associated with a worsening financial situation. And that’s the same for a country’s economy as it is for an individual’s financial position.

In the US today, debt is everywhere. You can’t buy a house without taking on a mortgage that may be multiple times higher than your annual income.

Many people can’t afford to buy a car without financing it, which means taking on debt. And even buying things online we’re now bombarded with offers to finance our purchases, with numerous vendors now offering buy now, pay later services from various companies that have popped up to serve that sector of the market.

High government debt levels raise the risk of recession and financial crisis due to the potential impact on interest rates. And high household debt levels are a strong indicator of a weakening economy.

Are debt levels in the US increasing today? And could those increasing debt levels be the canary in the coal mine indicating that a recession could be imminent?

Some Key Debt Level Figures

Unsecured loan balances in the US have hit a record high, soaring 10% in 2025 to $276 billion, with 26.4 million consumers holding such balances, up from 24.5 million in 2024.

According to TransUnion, this is partially due to consumers consolidating their credit card balances into unsecured loans. Unsecured loans are also being used by lower-income consumers to help finance their cost of living, which has been rising faster than their wages.

Overall, household loan levels are at the highest level they have ever been, with nearly $21 trillion in outstanding debt, over 40% higher than at the start of the 2008 financial crisis.

Rising debt isn’t necessarily a problem if you can pay that debt off. But can American households do that?

Nearly 13% of US credit card accounts are now delinquent by 90 days or more. According to the New York Fed’s most recent household credit survey, this delinquency level has increased sharply over the last two years, and is now approaching the levels last seen during the 2008 financial crisis.

Student loans that are more than 90 days delinquent have also risen sharply, to nearly 10%. And auto loans delinquent for more than 90 days have risen to over 5%, also nearing levels last seen during the 2008 crisis.

The numbers for transition into delinquency are similarly worrying. This means loans that are now 30+ days late in payment for the first time.

Student loan transitions into delinquency have shot up to over 14%, credit card loans are at nearly 8%, auto loans are at almost 7%, and mortgage transitions to delinquency have been moving upward for the past several years and are now at almost 4%, back to pre-pandemic levels.

These numbers indicate that American households are having increasing difficulty paying off their debts, and that their financial position could be worsening. Their ability to weather an economic downturn is questionable, and in the event of an economic downturn these numbers could shoot even higher.

US Government Debt

What is perhaps more concerning than personal debt is the state of the US government’s finances. The US national debt currently stands at nearly $39 trillion.

The budget deficit for FY 2025 was $1.8 trillion, and the projection for FY 2026 is for a deficit of $1.9 trillion. What would the significance of those numbers be if a recession were to occur?

If you look at what happened during the last recession, during the pandemic, the federal government responded with trillions of dollars of fiscal stimulus. The Federal Reserve bought up much of the debt issued to fund that stimulus, which led to a massive increase in the size of its balance sheet.

The national debt, as a result, increased from $23.2 trillion in January of 2020 to $29.6 trillion by December of 2021, an increase of 28%. And, as we all remember, those trillions of dollars of new debt pushed into the economy resulted in inflation rising, until it hit 40-year highs in 2022.

So in the case of government debt, rising debt isn’t necessarily a sign of recession, but if the government responds to recession with more debt-fueled spending, it would send the national debt higher and could result in higher inflation.

Debt and Recession

There’s no question that debt levels within the US are rising, from governments to businesses to individuals. And with delinquency rates rising along with debt levels, there are certainly worries that we’re entering a period that has many similarities to the pre-2008 era.

Even though debt markers are below what they were in 2008, the reliance on buy now, pay later financing is scary to many analysts. And if a recession were to occur, many debt markers could rise to levels last seen in 2008.

Many American households are certainly experiencing financial hardship and financial uncertainty, and most Americans fear that the US economy will enter a recession within the next year. If the US economy were to experience a downturn, especially one similar to 2008, the results could be catastrophic for the financial well-being of millions of American households.

That’s one reason so many people today are turning to safe haven assets like gold and silver to help safeguard their wealth. They remember how markets fell by more than 50% from 2007 to 2009, and they remember how gold and silver saw such significant price growth in the aftermath of the 2008 crisis.

With gold and silver having hit record highs this year, demand to buy gold and silver has surged. Now is the time to start thinking about whether you need to add gold and silver to your portfolio.

If you want more information about how you can put gold and silver to work in your portfolio, call the precious metals specialists at Goldco today. With over $3 billion in precious metals placements and over 8,000 5-star reviews, Goldco has worked hard to become one of the best gold companies in the country.

Don’t let your hard-earned savings fall victim to a potential recession. Call Goldco today to learn more about how you can help safeguard your savings with gold and silver.

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