You can’t afford to forget lessons of Great Recession

WASHINGTON — The Dow industrial average hit 22,000 in August, ushering in yet another noteworthy high. But Americans also reached the big time with a different financial milestone this year — and not in a good way.

Outstanding consumer revolving debt — mostly credit card debt — hit an all-time peak of $1.021 trillion in June, according to the Federal Reserve.

This should be a scary statistic. The last time the debt level was nearly this high was in 2008, when the U.S. economy was mired in a recession.

“We simply can’t keep taking on credit card debt forever without it causing major problems,” said Matt Schulz, senior industry analyst for CreditCards. com. “This record probably won’t be a major tipping point, but it likely isn’t too far off.”

Schulz says this milestone should be a wake-up call about the level of credit card debt Americans are accumulating. It’s a reminder to remember the past.

Here’s what we learned during the Great Recession. People had what they thought was a reasonable amount of obligations. They were making their auto and mortgage payments. They used credit to buy stuff to fill up those homes, eat out more or take vacations. It all seemed manageable — until life happened: The housing market imploded and unemployment spiked. The illusion that people could get whatever they wanted — on credit — was shattered.

The truth was that the debt wasn’t as manageable as people thought, because they didn’t have an adequate cash cushion to help them through a disruption in their income.

As the amount of revolving credit is now soaring to new heights, it takes me back in time. (By the way, defaults are rising, too.) I fear that as the economy has improved, our collective memory of bad times has faded. Americans are again thinking they can get whatever they want with borrowed money.

Have we not learned our lesson?

“America’s credit card balances have never been higher, but there’s no reason to think they won’t just keep climbing,” Schulz said. “Combine that with steadily rising interest rates and you have a potentially volatile mix.”

In “The Life of Reason,” the late 20th-century philosopher George Santayana wrote this: “Those who cannot remember the past are condemned to repeat it.”

You’ve seen variations of this quote, but let’s look at it in the full context.

“Progress, far from consisting in change, depends on retentiveness,” Santayana wrote. “When experience is not retained, as among savages, infancy is perpetual.”