GenZ DOOMED As Debt Crisis Mounts

Summary

The video transcript discusses the financial challenges faced by Generation Z, particularly their increasing debt levels. It references a Wall Street Journal report highlighting that Gen Z is starting their adult lives with more credit card debt than previous generations, which can lead to long-term financial burdens. The conversation also contrasts this with a viral article from The Economist claiming that Gen Z is 'unprecedentedly rich.' The video explores the impact of inflation on everyday expenses, the rise in gig economy services, and how these factors contribute to the polarization of experiences among young people. It also touches on the cultural and economic shifts that have led to higher costs for services once considered affordable, such as food delivery and transportation, and how these changes affect Gen Z's financial stability and lifestyle choices.

Takeaways

• 📉 Gen Z is starting out with more credit card debt than previous generations, which can have long-lasting effects on their financial health.
• 💵 The average credit card balance for 22 to 24-year-olds was $2,834 in the last quarter of the previous year, up from $2,200 in 2013, according to TransUnion data.
• 🏠 Younger people with higher debt are more likely to be delinquent on payments and may need to rely on family support if they lose their job.
• 🎓 A larger percentage of Gen Z has graduated with student loans, contributing to their financial burden.
• 📈 There is a polarization in experiences among Gen Z, with some doing very well and others struggling, leading to a wide range of outcomes.
• 💼 Gen Z's full-time employment is on the rise, with their numbers in the workplace set to surpass full-time Baby Boomers.
• 🏢 The number of Gen Z Chief Executives and politicians is growing, indicating their increasing presence in leadership roles.
• 📈 Despite debt, Forbes reports that Gen Z is doing well overall, with nearly a third of 25-year-old Americans already homeowners and their luxury spending expected to grow significantly.
• 🛍️ There is a debate around what constitutes 'luxury spending', especially as more affordable 'luxury' items become accessible to a wider demographic.
• 💸 The shift from cheap services like Uber and food delivery to more expensive options has impacted Gen Z's budgets as these services are no longer subsidized.
• 🚗 Changes in the cost of services that were once considered affordable luxuries, such as transportation and food delivery, have forced a reevaluation of spending habits among younger generations.

Q & A

What does the Wall Street Journal report say about Gen Z and debt?

The Wall Street Journal report indicates that Gen Z is starting out with more credit card debt than previous generations, which can have long-lasting effects. The rising debt load is largely due to a surge in prices for food and shelter, coupled with a larger percentage of Gen Z who graduated with student loans.

What was the average credit card balance for 22 to 24 year olds in the last quarter of the previous year?

The average credit card balance for 22 to 24 year olds was $2,834 in the last quarter of the previous year, according to TransUnion data.

How does the financial situation of Gen Z compare to the Baby Boomers?

The Economist reported that Gen Z is doing well financially, with more than 6,000 Zoomer CEOs and a thousand Zoomer politicians. The number of Gen Z working full-time is about to surpass the number of full-time Baby Boomers, indicating that Gen Z is ahead of Boomers and Millennials in terms of full-time employment.

What is the impact of high unemployment during the 2008 financial crisis on Millennials and Gen Z?

The 2008 financial crisis and the subsequent recession had a significant impact on Millennials, with high unemployment rates. Gen Z, however, did not experience the same level of unemployment, as many were still in school during the crisis and benefited from government subsidies like the $600 weekly unemployment bonus.

How has the increase in interest rates affected credit scores?

As interest rates have climbed over the past two years, credit scores have taken a hit. The drop was most drastic for Millennials with credit scores between 660 and 719, whose scores fell by 26 points. Gen Z wasn't far behind, with the average credit score change for those with credit scores above 720 falling 24 points.

What is the current state of homeownership among 25-year-old Americans?

According to Forbes, nearly a third of 25-year-old Americans were already homeowners in 2022, outpacing both Millennials and Gen X at the same age.

How does luxury spending by Gen Z compare to older generations?

Luxury spending by Gen Z is expected to grow three times faster than that of older generations. However, the definition of luxury spending has evolved, with cheaper 'luxury' items becoming more accessible due to influencer culture and market flooding from China.

What is the role of the Federal Reserve in the current economic situation?

The Federal Reserve's zero interest rate policies and quantitative easing have historically subsidized services like Uber and food delivery apps, allowing them to operate at a loss to grow membership. However, as the Fed has tightened monetary policy, the costs of these services have risen, impacting Gen Z's budgets.

How does the increase in the cost of services like Uber affect Gen Z?

The increase in the cost of services like Uber can leave Gen Z in a difficult position if they have budgeted for and relied on these lower costs. As these costs rise, it can lead to increased financial strain and credit card debt, especially if other expenses like car ownership and insurance are also rising.

What is the debate about classifying gig economy expenses as luxury expenses?

There is a debate about whether expenses like Uber Eats, which were once considered affordable and integral to some people's lifestyles, should now be classified as luxury expenses as their costs rise. This classification could impact how people view their spending and financial management.

Why is it challenging for companies like Uber to become profitable despite their business model?

Uber's business model, which essentially acts as a middleman between drivers and riders, has struggled to become profitable despite its widespread use. This could be due to various factors, including high operational costs, aggressive expansion strategies, and the company's choice to prioritize growth over immediate profitability.

What is the cultural impact of the shift from cheap gig economy services to more expensive ones?

The shift from cheap gig economy services to more expensive ones has a significant cultural impact, as it changes the way people live and budget. It can lead to a sense of financial insecurity and a reevaluation of spending habits, particularly among younger generations who have grown up with the expectation of low-cost services.

Outlines

00:00

📉 Gen Z Debt and Economic Shifts

The first paragraph discusses the increasing debt levels among Gen Z, referencing a Wall Street Journal report. It highlights that young Americans are starting with more credit card debt than previous generations, largely due to rising costs for essentials like food and shelter. The average credit card balance for 22 to 24-year-olds has increased compared to 2013. The paragraph also contrasts this with a viral article from The Economist, which claimed that Gen Z is exceptionally wealthy and surpassing Boomers in the workplace. The discussion touches on the polarization of experiences within Gen Z, with some doing well while others struggle, and the impact of the 2008 financial crisis on Millennials.

05:00

💳 Credit Card Debt and the Gig Economy

The second paragraph delves into the potential reasons behind the increase in credit card debt among Gen Z, suggesting that the availability of cheaper luxuries might be a factor. It discusses how the perception of upward mobility and the promise of a college education leading to middle-class stability may be influencing spending habits. The paragraph also explores the impact of Federal Reserve policies on the gig economy, such as subsidized services like Uber and food delivery apps, which have become ingrained in Gen Z culture. The shift from these services being affordable to becoming more expensive is identified as a structural change that has affected Gen Z's financial situation.

10:02

🎵 Changing Definitions of Luxury and Necessity

The third paragraph ponders over what constitutes a luxury expense in the current economic climate, using Spotify as an example. It questions whether services that have become essential parts of life, like music streaming or news subscriptions, are still considered luxuries. The discussion also touches on the business models of companies like Uber, which despite its widespread use, remains unprofitable. The paragraph concludes with a call to action for viewers to subscribe to the show for access to more in-depth discussions and debates, emphasizing the importance of independent news in understanding the complexities of economic shifts.

Keywords

💡Gen Z debt

Gen Z debt refers to the financial obligations and credit card debt accumulated by individuals belonging to Generation Z, those born between the mid-1990s and early 2010s. The video discusses how Gen Z is starting their adult lives with more debt than previous generations, which can have long-lasting impacts on their financial stability and life milestones.

💡Credit card debt

Credit card debt is the money owed on credit cards that individuals must pay back with interest. The video emphasizes that young Americans, particularly those in Gen Z, are beginning their careers with higher credit card debts compared to previous generations, leading to potential financial struggles.

💡Student loans

Student loans are financial instruments used to fund education, which often need to be repaid with interest after graduation. The script mentions that a larger percentage of Gen Z individuals graduate with student loans, contributing to their overall debt burden.

💡Life milestones

Life milestones are significant events or achievements in a person's life, such as getting married, buying a home, or having children. The video discusses how financial burdens like debt can delay these milestones for Gen Z individuals.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. The script connects the rising debt load to a surge in prices for essentials like food and shelter.

💡Credit scores

Credit scores are numerical representations of an individual's creditworthiness and ability to repay debts. The video notes that as interest rates have climbed, credit scores have taken a hit, particularly among Millennials and Gen Z.

💡Luxury spending

Luxury spending refers to the expenditure on non-essential, high-end goods and services. The script contrasts the rise in credit card debt with an increase in luxury spending among Gen Z, suggesting a potential disconnect between financial health and consumption habits.

💡Homeownership

Homeownership is the state of owning a house or a dwelling. The video points out that while nearly a third of 25-year-old Americans are homeowners, there is a significant portion of Gen Z that is not, and they may resort to credit card debt as an alternative means to achieve a sense of stability.

💡Gig economy

The gig economy is a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. The script discusses how expenses related to gig economy services, like Uber and food delivery, have become ingrained in the lifestyles of younger generations and are now contributing to their financial strain as these services become more expensive.

💡Federal Reserve

The Federal Reserve is the central banking system of the United States, responsible for implementing monetary policy. The video suggests that the Federal Reserve's policies, such as low interest rates and quantitative easing, have indirectly subsidized services that Gen Z has come to rely on, leading to a shift in spending habits and financial expectations.

💡Polarization of experiences

Polarization of experiences refers to the phenomenon where individuals within a generation have vastly different economic and social outcomes. The video highlights that for Gen Z, there is a significant divide between those who are doing well financially and those who are struggling, leading to a complex and varied understanding of their generation's economic status.

Highlights

Gen Z is starting out with more credit card debt than previous generations, which can have long-lasting effects.

The rising debt load is largely due to a surge in prices for food and shelter.

The average credit card balance for 22 to 24-year-olds was $2,834 in the last quarter of last year, up from $2,200 in 2013.

Younger people with higher debt are more delinquent on credit card payments and often rely on family for help if they lose their job.

Economists and financial advisers suggest that high debt often leads to delays in life milestones like home ownership and marriage.

The Economist headline claimed that Gen Z is 'unprecedentedly rich', with more than 6,000 Zoomer CEOs and a thousand Zoomer politicians.

Luxury spending by Gen Z is expected to grow three times faster than older generations.

Forbes reported that nearly a third of 25-year-old Americans were already homeowners in 2022.

There is a polarization of experiences among Gen Z, with some doing very well and others struggling with debt.

The gig economy and services like Uber and food delivery, once cheap due to Federal Reserve policies, are now more expensive.

The shift to more expensive gig economy services has impacted Gen Z's budgets significantly.

Millennials benefited from subsidized services due to zero interest rate policies and quantitative easing.

Credit scores have taken a hit as interest rates have climbed, with Millennials and Gen Z experiencing the most significant drops.

The cultural and economic shift has led to a real structural change in the economy that is felt at the end of the month when credit card debt is higher.

The classification of expenses like Spotify and Uber Eats as luxury expenses is a point of contention as they have become embedded in the lifestyle of younger generations.

The increase in the cost of services that were once cheap is causing a significant impact on the budgets of Gen Z.

The discussion highlights the need for a reevaluation of what is considered a necessity versus a luxury in the current economic climate.

Transcripts

so you wanted to talk about uh a new new

uh phenomenon around gen Z debt yeah so

the Wall Street Journal had a report we

can put this up on the screen because I

want to juxtapose it with something that

went viral just a couple of weeks ago

Ryan I don't know if you remember this

headline uh from The Economist we'll get

to it in a second but here's the Wall

Street Journal they say gen Z sinks

deeper into debt and I'll read a little

bit from the beginning bless you they

say Young Americans are starting out

with more credit card debt than

Generations before them that financial

burden can have longlasting effects no

kidding the rising debt load largely ref

a surge in prices for food and shelter

food and shelter at the start of their

careers coupled with a larger percentage

of gen Z who graduated with student

loans now the average credit card

balance for 22 to 24 year olds was

$2,834 in the last quarter of last year

compared with an average inflation

adjusted balance of about $2,200 in the

same period in 2013 that's according to

TransUnion data from TransUnion younger

people with higher debt are more

delinquent on credit card payments and

need to rely on family for help if they

lose their job say economists and

financial advisers They al they also

often delay life Milestones including

home ownership and marriage say the

economists yes obviously now so it's up

about 10% little bit in 10 years yeah

about 10% in 10 years they also compare

it though with Boomers uh another news

Zealot that compared Jen Z to Boomers

recently was The Economist and this went

fairly viral on Twitter there were a lot

of conversations it looked like

libertarian Twitter was just gloating

over this Jen Z is unprecedentedly rich

that's the headline from The Economist

just a couple weeks ago that was

published on April

16th uh and The Economist wrote jenz is

taking over in the rich World there are

at least 250 million people between born

between 97 and 2012 about half are now

in a job in the average American

workplace the number of Jers working

full-time is about to surpass the number

of full-time Baby Boomers uh those born

between 45 and 64 America now has more

than 6,000 Zoomer Chief Executives and a

thousand Zoomer politicians

uh and they're saying that you know gen

Z's full-time employment makes them uh

puts them ahead of Boomers and

Millennials uh I would assume Ryan

that's mostly due to women in the

workforce uh it's and Millennials

because of the 2008 financial crisis and

the massive recession because what what

yall gen Z people don't remember is what

it was like to have high

unemployment um and you know except for

Co although a lot of them were still in

school right and you got and there was a

$600 a week you know uh unemployment

bonus on top of your regular uh

Unemployment uh so but the idea of

looking for a job and being unable to

find it um is something that people

obviously still experien but nowhere

near at the scale um that they

experienced in the the 2010s and then

also in like the you know late '70s '

80s ear into the early 90s um which is

and it's a tragedy that there's been

this kind kind of cultural memory

holding of the of the pain of

unemployment because we have been

grappling with the pain of inflation

instead and it and it has made people

kind of forget how how good it is to be

able to tell your boss to f off and go

to another job to tell your boss that

you're you and your co-workers have

organized the union and they there's

nothing they can do about it except

recognize it yeah uh and so on like yeah

and so the journal goes on to talk about

uh credit scores so as interest rates

have climbed on the past two years those

credit scores have taken a hit the drop

was most drastic from Millennials with

credit scores between 660 and 719 whose

scores fell by 26 points gen Z wasn't

far behind the average credit score

change for Gen Z with credit scores

above 720 fell 24 points during that

time period according to Credit Karma

now another thing Forbes wrote about

this recently uh they said you Jen is

not just doing okay we're actually the

author aumer actually really well off as

a whole in 2022 nearly a third of

25-year-old Americans were already

homeowners outpacing both Millennials

and Gen X at the same age our luxury

spending is expected to grow three times

faster than older Generations so if we

just suppose that luxury spending with

credit card debt that's an interesting

thing too it depends on how you're

classifying luxury spending obviously uh

but there's also just this moment of

really cheap luxury uh that's

accumulated uh in the wake of you know

China and flooding our Market with all

kinds of different Goods with influencer

culture and all of that it's just like

people spend because if you can't afford

a home and I think that's part of what

this is speaking to I'm curious what you

think about this Ryan is people are

having dramatically different different

experiences um and that was true

Millennials obviously this is always

partially the case but I think it's

especially been it's been acute for

Millennials and gen z um where you

whether you're doing well or poorly

you're going to be doing really well or

really poorly that there's this sort of

polarization of people's experiences and

for Gen Z if you're not in that third of

home owners um you know probably to get

by you are loading up on credit card

debt and you probably are purchasing

what might be classified as a luxury uh

and we've seen this kind of happening as

luxuries get cheaper more affordable

it's easy to kind of load up on them

just to get by in the misery of like

being a renter perpetually and trying to

dig out of the hole when you feel like

there isn't a lot of room for Upward

Mobility you may be employed but you may

not feel like you're in a space where

there's a lot of room for growth um you

were you know promised that college

education was your ticket to the middle

class and instead I've heard this from

some of my friends that you you just you

already have $50,000 in debt so why not

take the vacation and you we may

disagree with that and you know we could

get Dave Ramsey here and he could

disagree with that uh but the

justification for it is fairly obvious

and one thing that doesn't get talked

about a lot is that Millennials uh also

got subsidized

Services they were subsidized by the

federal reserves like zero interest rate

policies it's quantitative easing that

pumped Silicon Valley full of money

Silicon Valley was then willing to lose

lots of money on these different app

Services Uber uh lift Uber Eats food

delivery like all of that stuff was

losing huge amounts of money and they

were able to lose that money because

they were trying to grow their

membership and that was entirely

subsidized by the Federal Reserve who

was just handing money to these Silicon

Valley Executives who then believed that

they were Geniuses uh you know for

making an app that helps you get food

you know from McDonald's to your house

and so yeah it was so cheap to get an

Uber and and to get Uber Eats and the

rest of it that became embedded in the

culture that gen Z then inherited yes

then they turned the spigot off and the

price of Ubers and lifts and and uh and

meal deliveries you know went up to to a

place where the companies are actually

trying to make profit instead of just

relying on the on the Federal Reserve do

that money is coming out of genz budgets

that's such a good point in a way that

Millennials didn't have to pay it before

and it's kicked off this like really um

you know crazy discourse around food

delivery and such but underlying at all

is a real structural change in the

economy that um people may not have

necessarily identify as having occurred

on their watch but they feel it yeah

they feel it at the end of the month

when they're like oh my credit card debt

is higher than it was last month and

higher than it was before and I I just

cannot make make things work anymore why

what's what's going on what am I doing

wrong I'm really curious actually that's

such a good point because I'm really

curious how many of those kind of gig

economy expenses are classified as

luxury expenses in the calculations that

Forbes was citing because if you're

classifying Uber Eats as a luxury

expense uh but you know at this point

you're somebody whose entire life has

been sort of built around like maybe you

don't have a car um because you've

always relied on fairly cheap Uber Eats

delivery before you know maybe prices

keep going up higher and higher you just

didn't get a car you live in a city and

you didn't need a car you you didn't

need to go take a bus to go to this

restaurant or whether or not this is

wise spending is a different question

than whether or not people reasonably

came to rely on it uh because prices

were lower than they're getting now uh

so I think that's and even Uber in and

of itself maybe you didn't buy a car

because Uber was really cheap and easy

to use and the car that you were in the

city that you lived in is that

classified as a luxury expense or how is

that

how are prices going up and some of

these things that have become really

baked into the lifestyles of a lot of

younger people because it was like the

air that they breathed it's the way that

the city worked um how is that being

classified I think the car point is a

much stronger one just from my own

fivery sympathetic perspective because

it's like yeah like you budgeted in the

past it was going to cost you x amount

of money to take Ubers and so as a

result you're like all you know what um

there's also Subways and buses and and

I'm going to Cobble that together and

I'm not going to get a car so you don't

get a car then the cost of Ubers goes

through the roof while at the same time

the cost of audio Insurance the cost of

cars has gone through the roof so you're

kind of stuck uh either way as a gen xer

I see the food delivery debate and I'm

like come on you like get on your bike

go walk to the place and pick your own

food up or or cook at home like you can

like there's lots of YouTube videos you

can learn you know you can cook

something so I hear you but even as

somebody with antipathy to that whole

position I recn that the the rug was

pulled out from people in the sense that

right culturally and economically it was

Dirt Cheap to get all this stuff because

of the FED yes and now all of a sudden

it's not cheap and you built your life

so I can t i can tisk TI people yeah but

things did change yes yes and and it and

it changed in I'm boiling the Frog kind

of way just slowly getting more and more

expensive until all of a sudden you're

like whoa right this was $40 for this

bowl right and then yeah but come on and

and obviously before and after the

pandemic some of this is different but I

think the the point about Uber is a

really really interesting one and you

think about like for example Spotify I

bet that's I bet that's classified as a

luxury good would they have classified a

Wall Street Journal subscription uh 20

years ago as a luxury good because

honestly a lot of people subscribe to

Spotify for their playlists uh but also

because it's probably their primary

source of news is probably where they

get the podcast or else you're going to

get breaking points that's right well

you can get it everywhere that you

download your podcast and that you

stream your podcast Ryan but seriously I

mean there's all of these kinds of

things that uh are just different than

they were in previous generations that

uh Spotify is profitable I believe but

Uber is still not a profitable company

which is insane to me Uber does nothing

Uber has like Google Maps and like

PayPal laid over each other with a chat

app in there yeah and they don't do

anything after that yeah the driver you

know buys the car puts the gas in the

car drives the car the the user connects

with the driver how this middleman can't

figure out how to make a profit they can

they just don't want to they want to

keep writing it out I because they they

can keep getting the money I mean it's

it's a vicious cycle yeah yeah anyway

anyway that's enough of us like doing

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