Posted on 01/08/2010 6:52:53 PM PST by TigerLikesRooster
Consumer Credit Plunges $17.5 Billion On Consensus Of -$5 Billion, Largest Drop On Record
Submitted by Tyler Durden on 01/08/2010 15:15 -0500
US consumers have said "enough" - in November consumer borrowing plunged by seasonally adjusted $17.5 billion, the largest drop in history, on a -$5 billion consensus... and the market doesn't move one bit. Quants 1: Efficient markets 0. In November total credit dropped at a whopping 8.5% annualized rate, and while auto-related nonrevolving loans dropped a mere -2.9%, revolving credit plunged a stunning 18.5% annualized. This is a full blown consumer borrowing revolt.
Here is the month over month change in total consumer credit:
A chart of total consumer credit: in November it was at $2.464 trillion, after a record 10 sequential months of decline.
Ping!
This is very deflationary
Banks to get hammered again
No let up in the recession
It is interesting that consumer debt trends seem to follow government debt until 2008 when the real estate train went off the tracks.
Meanwhile, government continues to extend itself higher credit limits and print more money. Why do so many expect a completely different result?
I see the stock market go up when the most dangerous bubble of all, public debt, continues to grow. I don’t get it.
>>I would say this means:
>>This is very deflationary
>>Banks to get hammered again
>>No let up in the recession
Good! People are finally growing up. The economy has reached the critical point where the people can no longer afford to prop it up with their credit cards. When the banks started changing the terms of everyone’s cards a few months ago in preparation for the new law that goes into effect in February, I think people finally said “enough is enough”.
The economy will take a hit as people move towards living on cash, but the alternative is far worse because it leads to virtual serfdom.
While I agree with your idea the worst bubble of all, public debt, is blowing up at a rate beyond our comprehension.
I can understand deflation in the short term but does our government debt bubble not eventually cause massive inflation when the only alternative is to monetize the debt?
I read plenty of opinions but I do not have any expertise beyond managing the budget for my own family. I don’t see how the value of a dollar will not fall drastically when government can’t pay its own bills.
It’s my fault. I paid off my credit cards this past year and then cancelled them keeping my Sears CC for ‘old home ownership’ maintenance emergencies. :)
ZeroHedge is not “NEWS’. It is a BLOG.
Deflation.
The stock market isn't the US economy. In my opinion it's mostly an game for insiders. They see the average investor in stocks (like me for instance) as suckers --- potential swindle targets.
10s of millions? seem to be in your boat.
What to do with the cash?
Seems like some are putting it in the stock market to get a better return than a treasury or CD.
yitbos
Actually, this is very bad for us, and I believe it was done intentionally by international banks beginning in September 2008. They're destroying credit on purpose.
Money and debt are both equal - the difference being that money is owned while debt is owed.
Less consumer debt translates to less money in our money supply. This translates into reduced wages, reduced benefits and lost jobs.
The economy will take a hit as people move towards living on cash, but the alternative is far worse because it leads to virtual serfdom.
Cash is serfdom. Money is just a representation of debt. We will always be serfs unless and until we take back our economy from the bankers who created a debt-based monetary system.
Everything you bring home on your paycheck represents labor that still needs to be completed in the future. Money is a claim on future labor.
According to the Fed's H.4.1 report, most of this money is supposed to be sitting in excess reserves at international banks. If that is just a book keeping entry and that money is actually being used as you wrote then the second American Revolution needs to begin today...right now.
Maybe that's why the Fed won't allow an audit of its books?
Credit is being destroyed at a faster rate than the US government can create new debt (or encourage others to do it through programs such as cash for clunkers).
A higher level of credit destruction versus debt creation equals deflation.
That's true. The equities markets are Las Vegas on steroids.
The credit markets are what people should be watching - and very few are...much to their future economic peril.
33% interest will crimp most people wanting to use credit.
To my way of thinking, if you have cash to invest, and you also have high interest rate debt (credit cards) like many Americans do, your best "investment" right now given the low rates of return on just about all financial markets these days is to pay down your high interest debt. Heck, even most people's home/auto/school consumer loans have way higher interest rates than the rate of return you can get on stagnant stocks, bonds or the money market right now. I think that's what most of us middle Americans who are lucky enough to still have a job are doing at the moment - paying down their debt rather than "investing" money in something likely to take a loss or provide very little interest earnings in our foreseeable Marxist future. More money in your pocket in the long run.
We have reduced our revolving credit by about about 5k to just over $200. My savings rate has probably tripled.
This rotten economy has certainly helped me to get on the right track.
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