The debt ceiling impasse may be over, but Americans may be reeling from its effects for a long time. The deal, which includes suspension of student loan forgiveness, is already putting strain on US banks.
Credit card debt is almost at $1 trillion, with the possibility of a fifth of student loan borrowers defaulting on payments. Amidst all these, America is proving to be an unwelcoming climate for crypto companies and investors in the wake of a new SEC crackdown.
Here are some of the financial news that made headlines this week.
Americans now hold record amounts of credit card debt.
Americans now hold a record amount of credit card debt — nearly $988 billion, according to the Federal Reserve Bank’s latest data.
On average, Americans carry around $5,733 in credit card debt, according to TransUnion’s latest report. But when you break it down by age, most carry more than that. Those between the ages of 40 and 49 hold an average of about $7,600 in credit card debt — the highest of any age bracket, per TransUnion data.
20% of student loan borrowers risk defaulting.
The Consumer Financial Protection Bureau warns that 1 in 5 student loan borrowers have risk factors that could cause them to struggle when their bills resume. Many people who have student loan debt have expanded their debt commitments during the three-year payment moratorium and fallen behind on other payments.
As of March, around 2.5 million borrowers with student loan debt were behind on one or more loans or payments. Delinquent debtors now total 200,000 more than they did in September of the previous year.
Netflix sees increase in subscription following crackdown on password sharing.
Netflix’s crackdown on password sharing may be in its early days in the U.S., but it appears to be having the effect the video streaming company was hoping for – a boost to its subscriber base.
Since informing its subscribers of its new password-sharing policy in late May, Netflix has had four of its single-largest U.S. consumer signup days since data company Antenna started monitoring the business. Netflix saw roughly 100,000 daily signups on two different days.
Antenna reports that since the email started going out, there have been 73,000 average daily signups for Netflix, a 102% rise from the prior 60-day average, surpassing the peak in signups during the initial lockdowns of the pandemic.
Crypto tokens plummet following SEC crackdown.
This week, SEC Chair Gary Gensler intensified his campaign against the cryptocurrency sector by accusing Coinbase and Binance of violating securities laws and raising concerns about the future of token trading. This resulted in a lawsuit against the two largest crypto exchanges from the US regulator.
The lawsuits and Gensler’s appearance with CNBC on Tuesday, in which he declared “we don’t need more digital currency,” caused a sell-off that saw four of the top ten coins lose at least 15% of their value.
The seventh-most valuable cryptocurrency, Cardano, has dropped 20% during the last week. The ninth-ranked Solana fell 18%. The 10th-ranked Polygon dropped 18% as well. Fourth-placed Binance’s BNB token decreased by 16%.
The two most well-known cryptocurrencies, Bitcoin and Ethereum, were less volatile, each falling by less than 5%.
Raised debt ceiling may put more strain on US banks.
As the debt ceiling crisis recedes, traders and economists are predicting that a $1 trillion borrowing spree by the US government will put further pressure on the nation’s banking sector.
The Treasury Department will work to restore its cash balance after that issue is resolved, which had previously blocked the US from raising borrowing levels. Last week, the cash balance fell to its lowest point since 2017.
By the end of 2023, according to a projection by JPMorgan, Washington will need to borrow $1.1 trillion in short-dated Treasury notes, including $850 billion in net bill issuance over the next four months.
A principal concern voiced by analysts was that the sheer volume of new issuance would push up yields on government debt, sucking cash out of bank deposits.
Start-ups face cash crunch.
The pace of startup shutdowns is on the rise, as fresh capital from venture investors and is drying up.
Compared to the trend in the last 2 years, going public is nearly impossible.
Interest rate hikes and market gyrations have shaken the global venture capital sector, forcing many businesses to scale back their investments. The gloomy situation has been worsened by the collapse of Silicon Valley Bank.
That means startups are grappling for scarce funding amid lower valuations from potential funders.
In recent months, several companies that raised significant venture funding have folded. This includes biotechnology company Goldfinch Bio, wine business Underground Cellar and fintech company Plastiq.
Larger shutdowns could put further pressure on venture returns that have been falling overall. The yearly internal rate of return for venture firms was negative 7% in the third quarter of 2022, the lowest value since 2009, according to PitchBook Data.
Apple enters the world of virtual reality.
The Vision Pro headset, Apple’s first significant new release in nearly ten years, was unveiled on Monday.
The gadget enables users to view any content accessible on a computer monitor overlaid on the actual world, as well as virtual reality.
Tim Cook, the company’s chief executive, claimed in a video at the Worldwide Developers Conference that the Vision Pro is “a revolutionary new product,” that has the power to change, “the way we look at technology and the role it plays in our lives.”
The device opens up a new way to interact with digital content in the physical space using the user’s hands, eyes, and voice to interact with apps. Users can control the device with their hands and experience movies, TV shows, and games in a more immersive way.
Apple says the device, which will sell for $3,499, won’t be available until early next year.
Game over for GameStop’s CEO.
GameStop’s shares plummeted following the announcement that Chief Executive Matt Furlong was fired without reason.
GameStop shares plunged 18% Thursday, its largest percentage decrease since mid-2021,
The video game retailer also announced the elevation of Ryan Cohen to executive chairman amidst posting disappointing quarterly earnings.
Mr. Furlong was fired just two years after he was hired as part of a push for GameStop to advance into e-commerce more quickly. While Cohen co-founded the online pet supply store Chewy, Furlong joined from Amazon.
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