Save, America! Record Credit Contraction in July: Is America Wising Up?

Tuesday, September 08, 2009 , , , 0 Comments


Pic credit: LOLFed


Don't believe the hype, America and don't listen to the rhetoric about spend, spend, spend because it's the American thing to do. Don't you see where that got us? If you don't, Jr Deputy Accountant humbly suggests you immediately fuck off and move to Uzbekistan kthnxbye. And no, I am not kidding.

Reuters:

WASHINGTON (Reuters) - Total U.S. consumer credit fell by a record $21.6 billion in July, Federal Reserve data showed on Tuesday, the latest hint household spending would be too weak to drive the economy's recovery from recession.

July consumer credit outstanding fell at a 10.4 percent annual rate to $2.47 trillion, steeper than analysts' expectations for a $4.0 billion drop. Total credit in June tumbled $15.5 billion rather than the $10.3 billion drop previously estimated by the U.S. central bank.

"It is one more important sign that consumers are not going to be contributing very much to the economy for the balance of this year and probably for a good part of next year. Consumers will be in the background," said Bernard Baumohl, chief global economist at The Economic Outlook Group in Princeton, New Jersey.

With an unemployment rate of 9.7 percent, the highest in 26 years, and incomes falling, households have drastically cut back on spending. Consumer spending accounts for about two-thirds of U.S. economic activity.

While key reports suggest the economy is probably in the early stages of recovery from a recession that started in December 2007, continuing jobs destruction has raised fears that the healing process will be slow.

Consumer credit has now declined for six consecutive months, the first time this has happened since the period from June 1991 to December 1991, the Fed said.

"There is no way that this recovery can be sustained unless we see a pickup in household spending. The big question out there is will we see Americans spend again to keep this recovery alive," said Baumohl.
Perhaps Mr Baumohl would be less concerned about "keeping this recovery alive" if this were, in fact, what a reasonable person might call recovery. A few FASB fudges and some bailouts do not a recovery make, sir.

File this under: duh

As Market Ticker points out, it is not a matter of the consumer choosing not to shop, it is that they are not able to:

*U.S. JULY CONSUMER CREDIT WAS FORECAST TO DROP BY $4 BILLION *U.S. JULY CREDIT CARD, OTHER REVOLVING DEBT FALLS $6.1 BLN *U.S. JULY NON-REVOLVING BORROWING FALLS RECORD $15.4 BILLION *U.S. JUNE CREDIT FALLS $15.5 BLN, REVISED FROM $10.3 BLN DROP *U.S. JULY CONSUMER CREDIT FALLS RECORD $21.6 BILLION, FED SAYS

Forget the so-called "recovery" given these sorts of numbers.

Consumers are unable and unwilling to borrow.

The inevitable contraction that is necessary to put the financial system back into balance is happening - whether The Fed wants it to or not.

This is a roughly 0.8% contraction in one month.

Stick that in your pipe and smoke it, Bernanke.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

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