Americans owe more on credit cards than Pakistan's GDP.

Firing into Wednesday!

Hello, Curse and Coffee friends,

Today, we look at the USA’s K-shaped economy.

Hit reply and let us know what you think (we read all of your kind words).

Coffee at the ready…

Pakistan has more than 250 million people and an economy worth $410 billion.

Americans owe three times that on credit cards. Guess which end of the income ladder is drowning.

The take: The New York Fed's own researchers now call this split "K-shaped." Rich households spend from assets. Poor ones borrow from next month.

What happened: The Fed released its Q4 2025 Household Debt and Credit Report on Tuesday, showing credit card balances hit $1.28 trillion — up $44 billion in one quarter, 5.5% year on year.

Why it matters: Borrowers under 39 are defaulting at nearly double the national rate, and 55% of consumers now carry balances just to cover groceries and fuel.

What to watch: The delayed January jobs report drops today. Moody's chief economist Mark Zandi says the forecast is "zero." Benchmark revisions — the government recounting last year's job numbers — could wipe out most of 2025's reported gains. If the labour market is weaker than we've been told, the pressure shifts to the Fed: cut rates again and risk inflation, or hold and watch the bottom of the K snap.

The average card APR sits around 21%. New cards? Nearly 24%. The Fed cut rates three times in late 2025. Somehow, your minimum payment missed the memo.

[Analysis] US Bank Economics Research Group, "The K-economy in 2026: Same story, new amplifiers," January 2026

Background: The term "K-shaped economy" took hold during the pandemic, when higher-income households rode the wave of remote work and rising asset prices, while lower-wage workers got hammered. The gap briefly narrowed in 2020–2021 thanks to stimulus cheques, then widened right back. The top 10% of US households now account for nearly half of all consumer spending.

Key quote: Fed Chair Jerome Powell acknowledged there's "a lot of anecdotal data" showing "consumers at the lower end are struggling" while at the top, "people are spending."

Strategic read: This data lands hours before a jobs report that could confirm the labour market has been weaker than anyone officially admitted. Benchmark revisions could rewrite most of 2025's gains. If that happens, the comfortable narrative about a "resilient consumer" starts to crack at the bottom first.

Before we slurp into today’s brew…

Here are some wordies from today’s sponsor.

Successful AI transformation starts with deeply understanding your organization’s most critical use cases. We recommend this practical guide from You.com that walks through a proven framework to identify, prioritize, and document high-value AI opportunities.

In this AI Use Case Discovery Guide, you’ll learn how to:

Get the Guide.