Matt Yglesias Turns Our Eye To Consumer Credit

With the new consumer credit data now added to FRED, we can see the return of consumer credit as per capita revolving credit is growing again after a massive crash. It’s noteworthy that we did have an uptick earlier that was then cut short, perhaps by Europe worries or perhaps by the debt ceiling. Stuff happens. 

Here’s the range from the 1968 0 baseline:

The Wall Street Journal notes that this may be signaling the rising cost essentials like food and gas, and that the huge bump in November may be consumers loading purchases onto credit cards for the holidays. Americans are saving less than ever now, with our savings rate at 3.5%. But the Fed currently targeting our yearly growth rate from 2.5% to 2.9%. Seeing as how our unemployment rate is still depressing the economy, and much of the new employment gains being heralded are coming from temporary and low hour work positions, this news might be a sign that Americans are expending credit just survive. That and the holiday boost may be the simplest explanation. Of late Yglesias is pushing his own predictions that growth will return to our economy in the form of new housing construction, the replacement of cars and home appliances, but I have yet to see him extend some seriously convincing arguments with evidence to back.

Zero Hedge’s take:

As the just released G.19, aka Consumer Credit, data from the Fed indicates, in November US households borrowed a 10 year high amount of $20.4 billion. Of course, reading between the lines confirms that all is as usual not as it seems, and not to conclude that the money multiplier model is back in action. Because of the $20 billion, only $5.6 billion was revolving credit, with the bulk in cheap Subprime loans funded by the government for purchases of GM vehicles and student loans. Granted even so the revolving credit jump was the biggest since February 2008, when deleveraging was the last thing on consumers’ minds. So are consumers relevering again? And if so are they doing so because they are confident the economy is improving? We doubt it, and we are fairly confident December data will be quite different and will show a notable reversal when effecting for all the record merchandize returns following the early Thanksgiving retail splurge. Judging by the market’s non-reaction to this news, it seems to agree. Because if it didn’t it would also means that it is about time for the Fed to start tightening: and if there is one thing that would guarantee a 30% instantaneous correction it is the mere whisper that the Fed needs to withdraw some of its $1.7 trillion in excess liquidity out of the system.


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