Consumer Credit Declines Less Than Expected As Federal Government Is Once Again Biggest Lender

Tyler Durden's picture

Consumer credit (SA) came in at $2,418.9 billion, a decrease of $3.6 billion from a revised June number of $2,422.5 billion. The decline came exclusively from revolving credit totals, which dropped from $832.2 billion to $827.8 billion, even as Non-Revolving credit increased yet again, as the government is making auto loan almost as easy as taking out a 150% LTV loan from the bankrupt FHA. And speaking of the government, take one guess which holder of consumer credit was the only one to see another sizable increase in the month of July.... Correct: the Federal Government, which increased (once again) from $222.6 billion to $227.0 billion, even as all other holders of consumer credit declined (especially the Pools of Securitized Assets category as the shadow economy continues to shrink), or were flat, as shown on the chart below. So far the government is able to force (non-revolving) credit down the throats of consumers. Soon, even that will end.

The chart below shows monthly (NSA) changes in consumer credit by holder from April through July.


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skohiu's picture

what's that giant sucking sound?

Cognitive Dissonance's picture

I see your sucking sound and raise you the black hole.

mikla's picture

Ooh, touché.  ;-)

Linking the picture just posted on Denninger's site, it shows we're "just getting started".  Mathematically, "you ain't seen nothin' yet", as the consumer hasn't really started to deleverage yet (rather, non-revolving credit simply isn't increasing anymore).

It's going to speed up... from my little sucking ... to your black hole ... to ...

Note to readers:  Go to the site and see the video ... it's COOL.

Cognitive Dissonance's picture


I surrender to the mighty mikla. I brought a little whirlpool to the "End of the world as we know it" fight and you let me live with just a few small scars as a reminder that you "Don't mess with The Mikla."

Thanks. :>)

SDRII's picture

why is the breakout of the consumer data different from the top line. They show a 1.8bn net decline which doesn't equal the sums of the components. Furthermore the breakout differs from the summary?

SDRII's picture

good point - pays to read the release

reading's picture

Can I ask one question?  What is the value of seasonally adjusted consumer credit info?  Isn't the number just the number?  Why does ever report have to be "smoothed" out based on the season?  Just wondering if I am missing something...


traderjoe's picture

Could it be related to a seasonal bulge typically related to Christmas??

nopat's picture

You may have a change that is fundamentally unrelated to what it is you're observing.  For instance, you would ignore a rapid decline in Christmas tree sales in January or bathingsuit sales in September since the time of the year plays a heavy part in the overall expected level of each.  As was already said, there could be a glut related to Christmas and/or other significant dates, or changes in loan originator as kids get ready to go off to college/start the new semester in the fall and take out student loans; adjusting for seasonality takes this activity into consideration.  The rub is, adjusting for seasonality may mask an underlying problem with the market since the "why" something happens doesn't get asked and the seasonal component could potentially overstate/understate what is actually going on.  So you look at everything in total and make a judgement call as to the direction.

Yeah, it's all a big fucking guess.

Hang The Fed's picture

Wow, if there ever needed to be a warning bell to ditch any credit that you hold, it's the fact that the government holds most of it.  What does that translate into, exactly?  Default on your mortgage, and they're going to start using your yard to park a bunch of Abrams tanks?  Senators coming over to bang hookers in your kids' bedrooms?  If there's one universal truth about our government, whatever they give with one hand will be taken away two-fold with the other.

doolittlegeorge's picture

never forget, tho that "your grandma get's a check from someone other than you" either.

Hang The Fed's picture

Don't forget that various agencies have been looting the difference between pay-in and pay-out on SS for a long time now.  I'd be better off just taking that tax money and actually handing it to grandma than paying in to a system being managed by a cartel of theives.

midtowng's picture

From a Keynesian perspective, this makes perfect sense. Thus it wasn't by chance.

From any other school of thought, this is insane.

Spastica Rex's picture

Me? Poor and 100% debt-free. Screw you government/banks.

What_Me_Worry's picture

I am guessing debt-ridden with plenty of cash flow/real assets to handle debt payments will outshine debt-free over the next 5 years+.

Ironically, those with heavy debt also plan to be able to say "screw you government/banks", too.  However, the government/banks are just waiting to say "screw you foreign debt holders".

In the end, all the government/bank debt-holders(foreigners) get to say is, well, nothing.  It is sad that ultimately people in far-away lands that struggled all of their lives to just scrape by working hard in death-trap factories will pay the ultimate price so that we could all buy a new boat equal to 30 years of their salary with no money down.

OT: Did you know you can get a 30-year loan on a boat?  WTF?  I am actually going to look for a bank that will offer me a 30-year loan on a boat with no money down.  It'll make a nice guest house one day.  Plus, I need a boat to have my infamous boating accident with all my PMs.

tom's picture

That federal government consumer lending is student loans.

somethingisrotten's picture

Student loans increase the most in July???  Is that what Erin said?

enobittep's picture

People who can't find jobs are going to school trying to ride out the downturn.  How does this factor into the unemployment rate calculation I wonder?

tom's picture

keeps them out of the official labor force count, lowers the unemployment rate and the labor force participation rate. lot of that going on.

Sudden Debt's picture

More Al Qaida fanatics take flying lessons and paying those with student loans. They are good for it...

doolittlegeorge's picture

i do hear "they pay in cash."  and as the ad says, "that's just as good as money."

digalert's picture

Looks like folks are moving to credit unions.

Ragnarok's picture

OT: Any news lately on Sprott Physical Silver Trust?  Thanks.

CrankyOldCreditGuy's picture

From Sprott: "An application for Sprott Physical Silver Trust has been filed with the SEC and Ontario Securities and Commission. We are currently awaiting a decision. We anticipate that the earliest it could begin trading is October 2010, but it could be as late as December 2010. Like the Physical Gold Trust, it will trade one the TSX and NYSE Arca. To view the prospectus please visit:

The proposed tickers are:


Ragnarok's picture

We anticipate that the earliest it could begin trading is October 2010, but it could be as late as December 2010.


That's what I wanted to know, thanks again.

John McCloy's picture

Once again the market has it's few days of all in hopium on a small amount of volume and floats up on rumors and no volume for a few days. It manages to cheat with a few futures pumps and as usual fails to attract few morons and cannot hold gains. Down we go. Tyler I wish you would show us one of those nifty market Afterhours/pre market gains Vs Market during business hours again.

This market is much weaker than most think.

doolittlegeorge's picture

so down in equities IS the good?  or is it "down with debt"?  i'm easily confused.

bmfe's picture

Seen it first hand: I was on vacation when I forgot to post a payment to an unsecured credit line by 4 days.  Automatically dropped my limit to 25% of what it was.    Heard similar stories around the office with HELOCs and credit cards.  The banks are in full CYA mode.

Fourth Horseman of the Apocalypse's picture

The Consumer Credit data is being impacted by the change in the student loan program from SLM to direct government loans.  This is why the Federal Government segment is growing and the Pool of Securitized Assets is shrinking.  This trend should continue for another 6-9 months.  

The real question is how much of the contraction in Consumer Credit from Banks and Finance Companies is caused by an actual reduction in credit or due to write-offs of bad credit?  There have been studies that consumers are actually borrowing more but less than what is being written off.  This could explain why retail sales have held up relatively well.  

Iam_Silverman's picture

"The real question is how much of the contraction in Consumer Credit from Banks and Finance Companies is caused by an actual reduction in credit or due to write-offs of bad credit?"


My thoughts exactly.  Every time I read about the average consumer delveraging, I wonder how much of that is due to defaulting on their debt vice actually paying it down.

Joeman34's picture

OT:  Any news on the missing Chinese Finance Minister Zhou Xiaochuan.  Just wondering if it was ever resolved...

citationneeded's picture

The rumor, I belive, turned out to be just that.


Edit: Link from where rumor got started:

web bot's picture

You know for proper effect we should call it what it really is:

Consumer credit: $2,418,900,000,000


I found that just by typing out the number with all zeros, I had to actually stop and count the zeros... I was getting confused looking at all of the zeros. We lessen the impact of this fiasco when when we refer to $2,418,900,000,000 as $2,418 billion or simply $2.4 trillion.

I propose that we only use all zeros when writing. This will make people have to stop and count... making the point and follishness of it all.


Bear's picture

Zeros add "nothing" ... but orders of magnitude. But we can make it:


This looks pretty big.

But it pales in comparison to the atoms in the head of a pin coming in at just over 200 quintillion.



Jake Lamotta's picture

With your criticism, all you idiots are literally missing this rally!  Bunch of bozos...

Hansel's picture

Gold is at an all time high.  WTF are you talking about?

Hephasteus's picture

Ya but is the rally missing us more than we are missing it?

Djirk's picture

Government should encourage and enable customers to de-lever. Do it fast like ripping off a band-aid.

Most of the leverage is in housing that is underwater. Banks should work with consumers a mark to market and re-set the mortgages. The all or nothing could end badly for everyone.

Government could create a financial hardship "semi" bankruptcy law where a part of debt is forgiven. The Fed could back stop the banks with liquidity and raise interest rates to improve cash flow.

Deleveraging or inflating is going to hurt one way or another. The long term solution is to stop punishing savers and make it sting for over leveraged people.