You're now on the archive server. Commenting has been disabled.
Consumer Credit Plunges $17.5 Billion On Consensus Of -$5 Billion, Largest Drop On Record
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.
»
- 13264 reads
- Printer-friendly version
- Send to friend
Similar Articles You Might Enjoy:
- Consumer Credit Drops For 11th Straight Month, Down -1.8 Billion, November Revised $4.3 Billion Lower
- Data Is Out: Consumers Have No Desire To Borrow
- Data Is Out: Consumers Have No Desire To Borrow
- Revolving Consumer Credit Has Biggest Jump Since 2007, As Depository Institutions Turn On The Spigot
- Apple Blows Away Top And Bottom Line
The question I have is, how far "back in time" are we going to go on the second graph. After the original crash back in october 2008, my original assumption was that the banks would go boom, and consumer credit would revert back to where it was in the late 1960's before the industry went on it's 40 year run. With the constant gov't interference in the markets I am at a loss. I think that as a minimum, we will retrace back to the levels seen in the mid eighties. The impact this will have on gdp will be devestating. Any thoughts?
Yes...consumers without income do not borrow. Banks do not lend to consumers without income.
Simple as that. Until/unless the Fed is going to lend to us at 0% and not expect to be repaid because we the little people do not have jobs, then consumer credit will continue to contract, impacting all the synthetic bullshit pyramided atop it.
What will occur is that the government will attempt to stand in for the consumer and borrow to maintain credit growth for as long as they can; this is the Keynesian stimulus answer. It's really not about "aggregate demand" per se, but about maintenance of the credit ponzi's need for continuous growth.
Well, it's the first half of the Keynesian answer. The trick is part two, where animal spirits return to save the day before the government goes broke. Needless to say, that looks a bit chancy under the present circumstances.
Of course you must mean before our currency is debased and the dollar becomes worthless.. Because I am sure you are aware by definition the governmnent cant go broke. It can continue to print dollars in perpetuity. If you really believe the government has a little piggy bank for future spending then you really dont understand modern money.
The real problem with the Keynesian model is that government intervention is "supposed" to be tied to policy makers having the PEOPLES best interest in mind. Alas since people have become consumers, the only living entities--immortal at that--are corpoarations. Thinking in terms of the goal of keeping the "people" aka corporations alive,I would venture to say that Keynesian policy is working just fine.
Unwinding our credit would be a disaster and would almost guarantee a Depression that would make us yearn for the 1930s.
The reason for such a brash statement stems from the fact that "money" is created from credit (debt) issued through a fractional reserve banking system. When banks lend under our current system, $1 can create as much as $10 (10% reserve requirement). Repaying or unwinding credit works in the same proportion. Constricting the money supply results in fewer dollars, fewer purchases, etc, etc. That is precisely the reason that we are printing like crazy.
Nobody knows the endgame for these policies, but, this is where we are now.
Your statement isn't brash. It's naive because it seems to assume that because the result will be bad that we won't let it happen. I hate to break it to you, but we can't stop it. It's already happening. Many of us just haven't figured it out yet. We will. Very soon. If Geithner gets thrown under the bus, they're going to come clean simultaneously. That will be all it takes. Game, set and match.
My brash statement was not intended to mean we won't "let" it happen. We can't outrun economic reality forever...
you've got things jumbled....most of the money
created over the past 12 months has been by the
fed...it has no way of getting the money into the
economy - certainly not within 12-18 months and in
fact the declining m3 figures show this - it is
shrinking....
the banks are not creating money for either
consumers of business because demand, qualification,
or safety is not there....furthermore, most banks
are not strong enough to do a lot lending...fasb
157 and other considerations restrict their lending
abilities....
finally, the fed and the government do not want
any money in the private economy....if they had
wanted the money there, it would be there already....
banks for reasons of solvency and orders are not
creating money...
How about the early 1900's? Deflationary collapse is inevitable. Shadowstats reported that M3 rate of change of money supply has gone negative. The FED can print a few trillion here and there but it sure ain't getting into the real economy, 12-14 Trillion dollars worth of wealth destruction and soon rising can not be offset by 2-4 Trillion in printing and borrowing.
I say GDP declines 75% atleast, if not more.
The 1900's is too far back. The most accurate view of the Economy this decade posits that we're in the financial portion of the Economic cycle (and arguably at a stagnation point). We'd have to go back to the last time we were a production economy. That means we actually have to start manufacturing again. But the Financialization phase has to end first, and there's only one way that can happen.
We'd be looking, optimistically, at the early 1970's for a comparison. And quite possibly farther back than that.
You're not the VK from TAE, are you? If so, this news is probably contrary to the anti-American, anti-middle class drivel posted there, so sorry about that. Not.
Anti-American, anti-middle class drivel?
I wonder where you get that idea from? This is absolutely false. The Automatic Earth has been warning the little guys for the last 2 years and even earlier in the form of The Oil Drum Canada. So why would the authors spend 3 years of their lives trying to warn a mainly American audience if they were anti-American?
If you'd actually care to read the posts in detail, you'll find TAE is all about educating people and helping them to face the devastating impacts of the coming few years. There is a systematic process through which societies/ economies decline and TAE is outlining that - http://theautomaticearth.blogspot.com/2010/01/january-1-2010-fractal-ada...
What are we are against is the theft, fraud, deceit and outright deception that has come to represent the US Govt and Banking system.
Give me a break. I & S's America bashing is quite well known. Though they've stopped making such obvious statements (probably because "donations" are down, apparently), it's still there to see every so often. They just don't seem able to keep it hidden.
Like it or not, this Financial mess isn't going to go away until the middle class gains enough strength to start buying again. You and your ilk can bash Americans all you want, and do your best to trash the middle class in order to support your profit-making agenda, but that's not going to change America's core strength one bit.
Did you choose that percentage because it corresponds to your IQ?
Well, the banks have to make room on their balance sheets for all those US Treasuries they are going to be buying from now on.
Bingo.....banks are the third shell under which to hide the long bond pea. Lending to the pesky, unpredictable consumer is fraught with too much danger.
God's work is sustaining an artificial lid on mortgage rates. Without that, the pitchforks will be sharpened for immediate use.
Surely you don't mean the Term Deposit Facility?
WSJ: Schwarzenegger Proposes Replacing State Worker Furloughs With 5% Salary Cuts And 5% Pension Cut.
Green shoots laced with THC!
That concludes this week's episode of Deflation News
Uuummmm, green shoot?
My credit card limit is very high relative to my avg. usage (2K -vs- 27K). Does anyone know if the banks benefit by giving absurdly high limits to card holders who pay off every month, even though the limits are never used?
Is the reported number based off credit limit or outstanding?
A couple of my card limits got haircut recently - is the data more a reflection of that?
They keep hoping that you'll use up a lot of your credit limit, so they can give you the vampire squid treatment in the form of finance charge usury. The average US credit card interest rate is something like 13%, when we're in deflation.
Run faster, little hamster
What are they gonna do if we get off the wheel?
No - I never pay interest, just pay off the balance each month. But I have seen video clips which say that debt-is-money and I wondered if they (banks) can use the limit given as some sort of capital. When I tried to reduce the available limit on-line I could not do that - they make it easy to increase the limit but not reduce the limit. (I live in Canada.)
I guess that when they calculate the ratio of total credit available in credit cards to the running total owed to the bank, it reflects risk. The highest the percentage of loans out the higher the risk during massive economic shock. Therefore, they would actualy like to have more people like you. Despite that they do piss you off and/or abuse you by trying to charge fees and force you to pay interest or annual fees, even though you pay in full. Don't forget that even though they make zero from you, you purchases by credit card nets them 3-5% from the merchants.
Thx Oracle - you are right, they always get something - I'm trying to use cash at all times.
The rapid decrease in the velocity of money means deflation, and yet we have asset inflation. I don't really follow all the complexities of this, anyone care to opine?
Yes, due to the extremely cheap money being offered by the U.S. and Chinese CBs, borrowers are taking huge chunks of "free money" and throwing them into any type of investment that may produce a profit. The commodity market is just one instance of where speculators are trying to create another bubble. This is how one can see targeted inflation within a broad deflationary economy.
I would like to speculate! Where's my free money?
Unfortunately the free money goes to the favored sons and daughters of the FED and it gets speculated in the market. Why do you think that the market keeps going up with 18% true uneployment and a S&P500 P/E in the stratosphere?
These Patricians, also would be the first ones to know when the free money is exhausted, thus bailing out before the Plebeians, who will loose the rest of their 401k
Bail out while there is time. Whet it happens you would have no warning. Use this as your warning.
"Velocity of money" makes no sense... read Rothbard... What is the velocity of a single transaction? The entire equation of exchange is flawed, and makes no sense.
Please tell me exactly what you mean by "velocity" - how do you define this term in your mind? (as specifically as possible)
Velocity relates to money in circulation versus money in a mattress, or in the case of banks, excess reserves.
Banks know that they will ultimately have to realize their losses on book, and the excess reserves will go up in smoke.
So what you are saying is that when the banksters hold excess reserves they are "going to the mattresses?"
http://www.urbandictionary.com/define.php?term=going%20to%20the%20mattre...
Apologies, the set up begged me to finish it.
Now that's a mental image...
+1 MsC...very funny, I liked it!
Here is a great "definition" on Urban dictionary.
In fact, this is exactly what our country should be called going forward -
SCAMerica
http://www.urbandictionary.com/define.php?term=SCAMerica&defid=102490
May I try?
It's not the velocity of a single transaction. It's the circulation speed of a money unit in the economy, i.e, the price sum of transactions, for which one money unit is used per time unit on average. It equals the total price sum of goods/services exchanged in the time unit divided by the total sum of money in circulation.
rc
Ok - but many transactions don't require the use of money since they net out...
Educate yourself people:
"The "price level" is allegedly determined by three aggregative factors: the quantity of money in circulation, its "velocity of circulation"... and the total volume of goods bought for money. These are related by the famous equation of exchange: MV=PT" http://en.wikipedia.org/wiki/Equation_of_exchange
but this equation is fallacious - there is no "equality" in any trade, since both parties BENEFIT from any voluntary exchange, one gains a good he values more than the money, the other the money that he values more than the good...
"The equal sign is illegitimate in Fishers eqation."
As for P... "the concept of an average for prices is a common fallacy. It is easy to demonstrate that prices can never be averaged for different commodities..."
As for T... "the total physical quantity of all goods exchanged, is a meaningless concept and cannot be used in scientific analysis."
finally V... "V is an absurd concept... what is the velocity of an individual transaction?... Velocity is not an independently defined variable... it is absurd to dignify any quantity with a place in an equation unless it can be defined independently of the other terms in the equation."
"The Fisherine eqation has been popular for many years because it has been thought to convey useful economic knowledge. It appears to be demonstrating the plausible quantity theory of money. Actually, it has only been misleading."
Rothbard - Man, Economy, and State pgs...832 - 842...
What about money's mass and density?
"Ok - but many transactions don't require the use of money since they net out..."
What transaction are you thinking about? Could you give some examples? I would have guessed that most transactions in modern capitalist society take the form goods/services for money and vice versa.
Anyway, it doesn't matter. The circulation velocity of money is just decreased by moneyless transactions, since the price sum of the goods/services that goes into the equation is smaller.
"The "price level" is allegedly determined by three aggregative factors: the quantity of money in circulation, its "velocity of circulation"... and the total volume of goods bought for money. These are related by the famous equation of exchange: MV=PT" http://en.wikipedia.org/wiki/Equation_of_exchange"
To interpret it in this way means to see the relationship reversed to how I see it. According to my view, the price sum of all good/services that are exchanged for money determines, together with the sum of money in circulation, the circulation velocity of money, but not the other way around.
"but this equation is fallacious - there is no "equality" in any trade, since both parties BENEFIT from any voluntary exchange, one gains a good he values more than the money, the other the money that he values more than the good..."
This is only a problem, if one doesn't distinguish use value and exchange value.
"As for P... "the concept of an average for prices is a common fallacy. It is easy to demonstrate that prices can never be averaged for different commodities..."
I don't see where the averaging is supposed to take place. P is a normalized price sum in the equation, but not an averaged price. The wikipedia entry doesn't say a word about averaging. It looks like Rothbard attacks a straw man created by himself.
As for T... "the total physical quantity of all goods exchanged, is a meaningless concept and cannot be used in scientific analysis."
From the wikipedia entry: "T is an index of the real value of aggregate transactions."
Apparantly another straw man, since T is defined as something totally different to the "total physical quantity of all goods exchanged" in the equation.
"finally V... "V is an absurd concept... what is the velocity of an individual transaction?... Velocity is not an independently defined variable... it is absurd to dignify any quantity with a place in an equation unless it can be defined independently of the other terms in the equation."
Again, not a word about V being the "velocity of an individual transaction".
Although, I don't think that the price level is determined by the equation above, Rothbard's arguments, if correctly reproduced by you, aren't convincing, since he mainly refutes something he only has made up himself, but not something what is actually said, apparently.
rc
Couple thoughts and I'd recommned you read the actual book instead of a wikipedia entry...
If you and I both have an account at bank A and I buy something from you and you buy something from me, and we both pay with a check... and they cost the same, no money will be used in that transaction... however according the equation of exchange, the "velocity" of money will have increased.
It is axiomatic to say that if I buy an apple from you for a $1, that the apple's price is $1. However $1 is not the value of the apple TO ME. The value of the apple TO ME is by definition more than $1 or I wouldn't have made the trade. Similarly the value of the apple TO YOU is less than $1 or you wouldn't have made the trade. Therefore to say apple = $1 (which is what the equation of exhange does) is wrong.
P... A "normalized price sum" is exactly what you cannot calculate. The government tries to by buying a "basket" of products and looking at how the buying power for that basket changes, but that is a very rough and inaccurate number. If their "basket" includes a television, how do they deal with the fact that now, as opposed to the 1960's, televisions are flat, screen, high definition, and have more features? What is an average television? Rothbard's point is that you can only show price changes relative to an individual item. But you cannot aggregate those changes into an index...
Just take a moment, and ask yourself "what does 'velocity of money' really mean?" If you can't answer it, outside of the equation of exchange, then it is not "independently defined"
The velocity of a single transaction is 1/t. t being a time period. Make two transactions with it, that becomes 2/t. The degenerate case is no transactions, a velocity of zero. Money stuck under a mattress might as well not exist as far as the market is concerned. If the concept somehow offends you, consider the inverse, time/transaction. How long does a dollar sit under someone's mattress before it makes a move?
This has important implications when measuring the real, productive economy. A single dollar that changes hands ten times in a day can indicate the same movement in goods, the same productivity, as $10 exchanged once. And either stands for more real productivity than a million dollars that doesn't move at all.
Ok - what if I pay my rent with a check? Does that count? A check is credit instrument, a claim on my "money" but not money itself... When my bank settles up with the mortgage holders bank, and no "money" changes hands, how does that affect velocity?
Do a ledger. List all the transactions that occur in time. Whether there is physical money changing hands is immaterial.
For example, we and another firm subcontract to each other our services for jobs involving 3rd parties. Many times we owe him the same as he owes us. This is for real services that involve a number of other transactions to perform.
So we exchange checks of around the same value.
On our ledgers, there is a transaction, also on his. Our respective banks see a deposit and withdrawal of roughly the same amount.
Velocity. Not balance.
Derek
Well I disagree that it doesn't matter if money changes hands... isn't the whole argument about money? In any event, you still have not defined Velocity. You've written it "Velocity. Not Balance." but you haven't defined it. What is velocity? Please be specific.
It seems to me you are confusing cash and money. Money does actually include checks, bank account deposits, card payments, etc. If I pay with a credit card, has money changed hands? Yes.
Velocity: It is a flow variable (calculated over time), so the only sense in which you may ask 'what is the velocity of a single transaction' is if you are asking for marginal velocity (first derivation).
It is you who is confused, my friend - read Theory of Money and Credit - Ludwig Von Mises.
stick with rothbard....velocity of money and
the quantity theory of money are quack ideas
with absolutely no value...monetarists and
keynesians are both voodoo economic schools not
worth the time of day...
velocity really refers to the expansion co-efficient
of the fractional reserve system and propensity
to not save....
A good point, and the underlying reason why heads will start to roll if the jobs outlook does not improve....real soon.
Less people working, more people earning less, less credit available.....of course, in a normal world this leads to declining prices of just about everything due to lack of demand and cash in circulation.
However, with Bernanke and his Boyz printing up a f*cking storm and splashing the trash cash to their Wall St. and Govt buddies, expect incomes and credit to further shrink, along with the job market, but pay $4/gallon for gas real soon.
This will be their undoing, blowing bubbles and crushing people while they themselves are suffering......kind of like twisting, for a little while anyway, the laws of nature. They will snap back violently.
Arco, what asset inflation? Prices on all assets that I'm aware of keep going down. And even financial assets are joining the party.
Umm, you ever hear of this thing called "Gold", this other thing called "Silver", or this other thing called "Oil"?
aren't those called commodities?
Agree with all the above. Would add that this is a the peculiarity of debt deflation. Surfeit of cash from debt gets parked into speculative, fast profit areas like equities and commodities. Meanwhile the real economy languishes due to an investment drought: R&D, infrastructure, capital investment all down. As debt compounding tightens the boa-grip there's less and less left over for the real economy, hence a downward spiral of decreased sliquidity allocation to value-added goods and services and decreased capital investment. All leads to a deflationary spiral in the real economy with co-existent inflationary bubbles in vital areas like energy. Which further tightens the the debt-grip.
Fundamental misconceptions abound: debt is not investment. It only is so long as you assume aggregate growth to repay the loan.
The contractionary future imposed by energy peaks and declining EROI mean that lending in the aggregate is foolhardy as an economic proposition. Thus, speculation and leverage but nothing else.
We got used to borrowing as a means to fund future production - in fact China is this writ large - instead of using productive savings to do so. Everything revolves around an attempt to get risk-free return, to have money make money by being idly parked in some "vehicle" which pays a coupon.
The contractionary nature of the post-Rome world is why debt usury was outlawed.
All debt needs to be converted to equity, and the notion of lending to a government to be backstopped by inevitable GDP and tax receipts growth brought to a final conclusion. This means we have to destroy central banks and revert to Colonial Scrip which was a Real Bills Doctrine currency regime.
Banking is a racket...money should not be permitted to "make money" without risk or based upon a presumption of perpetual growth. Every experiment with Central Banking or lending to sovereigns has ended with a gigantically indebted sovereign and a need therefore for growth and strangulatory taxation.
trav777 i totally got that . Thank you much for explaining.
The "inflationary bubbles" are probably supply shocks, as wells get capped, and it takes credit to get them back on line. Oops, there is no credit.
Its called Geology JM. We have more wells in operation in the US than anytime in history with advanced technology for extraction yet oil production continues a slow decline in the US from the peak 40 years ago. Peak Oil is Reality
I kind of liken it to: a "billionaire" with tons of debt gets to live a billionaire's lifestyle -- that is until his creditors call in his debt and force him to recognize his insolvency. It's almost as if insolvency is defined by the mood of the creditor. I do believe the U.S. ponzi economy will soon have it's day of a "credit call"...and the public will be shocked to here the country is suddenly considered insolvent!?! seems it all boils down to a psychological mind-fvck at the root!
I think this is very, very important, I don't know if it has been posted before. But here it is:
http://www.nytimes.com/2010/01/08/business/global/08chanos.html?ref=busi...
And another article I found somewhere on the net:
America’s savviest billionaires are betting big bucks on this China situation.
The truth is, I wouldn’t be so confident in my prediction if the facts weren’t backed up by two of America’s top billionaire investors. One of them single-handedly uncovered the Enron fraud in 2002 and made a fortune betting on its collapse. The other – an “obsessively secretive” California billionaire, according to Forbes – was one of the only investors who made money in 2008, as the markets crashed.
Right now, these famous billionaires… and a small group of savvy traders… are positioning themselves to capture HUGE gains as the Chinese market corrects over the next 6 months. To top it off, just a few weeks ago… the head of Morgan Stanley Asia made an unprecedented statement:
“China’s ballooning stock market bubble… is likely to burst in the first half of 2010.”
Why are rich traders and institutional investors confidently betting millions of dollars on a Chinese market correction in 2010? Well, over the past few months, something unusual has been going on in the Chinese economy…
* Cars running without gas?
According to Forbes magazine, car sales have almost DOUBLED all across the country. China’s state-owned car companies are thriving. Yet, gasoline consumption has been falling steadily.
* Factories using phantom energy?
The New York Times reported that China’s economy expanded an incredible 8.9% this year. Factories are churning out more and more goods; the Chinese are consuming more and more services. But a recent government-backed energy report showed electricity consumption fell off a cliff this year.
* Empty skyscrapers?
Chinese real-estate companies are booming in cities like Beijing and Shanghai… building high-end apartments and office complexes. But Zhang Xin – CEO of one of the country’s most successful property development firms – recently told London’s Financial Times: “We can see more and more empty buildings across the whole country…”
* Government buying TVs?
According to the government, China’s rising middle class has been buying an unprecedented number of TVs and electronics. (A 15% jump since last year.) At the same time, a Foreign Policy journalist reported that huge inventories of electronics lie boxed up in state-owned warehouses outside Beijing.
What’s going on here? What do these strange discrepancies in Chinese market data mean? And, more importantly, how could this situation help you collect thousands of dollars in extra income over the next 6 months? In a nutshell, it looks like the Communists are cooking the books [Wellink comment: well yes, but they are not the only one].
I don’t know about you, but I certainly don’t completely trust any data coming from an autocratic Communist government [Wellink: sic! The U.S. data are to be distrusted just as the Chinese]. For example, author and China expert Gordon Chang speculates that the Communist Politburo is forcing state-owned enterprises to buy millions of cars, clothes, and electronics… and store them in giant warehouses… to stimulate “fake” growth. And according to Foreign Policy, Communist Party officials have been “helping with layoffs” at factories all across China. They give workers 2 choices: Get fired… or “resign” and collect a big upfront payment. “I would estimate around 70% of workers took the resignation deal,” says one factory owner.
Very simply, resignations aren’t included in unemployment statistics. And the government wants to keep the stats optimistic… to prolong a stock-market bubble.
Jim Chanos, for one, thinks the Chinese miracle growth story “is getting harder and harder to believe.” Chanos is the billionaire American investor who first uncovered the Enron fraud in 2002… and made millions of dollars betting on its collapse. Now, he’s betting a ton of money on the collapse of Chinese stocks. And you’ve almost certainly heard of Bill Gross. He runs the world’s biggest bond fund, PIMCO. Well, he too recently bet that China’s stock market bubble will burst very soon”.
Uncovering the Enron fraud in 2002 must have been pretty easy. All you would need would be some old newspaper stories detailing Enron's collapse in 2001.
Owned.
The original article only mentions 2002 as the date that James Chanos testified before Congress about how he identified Enron as a target to short. The poster of the above simply got his facts wrong from the article. The article itself is still relevant and useful reading.
Those of you who believe in Chinese economic miracles should rush over and invest right now. Tell us how that works out come, say, August, ok?
Which casino, er I mean bank, is on the other side of these supposed billionaire's bets against China? Am I personally on the hook for another couple grand, via the U.S. treasury, to help pay off Chanos -- under investigation in the Fairfax deal -- and the "obsessively secret" billionaire if they win? I'd be hiding my identity, too -- we ain't gonna stand for it a second time.
Nout...thank you. ZH had an article on Chanos (and rogers) quoting this yesterday or wednesday.
MicroEconomics! Peoples make me
proud. And this during the Christmas
season too! Incredible!
Say goodbye to Pharoah.
bottom line . it is very likely "helicopter ben" will fly even more in the next months ! but he likes fly and he 's the best pilot.
Splendid. We Americans are finally sobering up from our consume-till-you-drop, hopium-enduced trance....and (not) voting with our dollars!
Either by choice, or necessity, votes affirming confidence continue to dwindle at a rapid pace.
Wait till the market gets a load of us!
Further proof that the retail sales numbers are wrong. In order to buy something the money has to come from SOMEWHERE
Numbers employed is down, hours are down and salaries are flat, so no extra money from income.
Both secured and unsecured debt is down so they're not borrowing the money
The savings rate is positive 5% so they're not drawing down savings.
So there is NOWHERE for the money to have come from to justify the increase in retail sales the government reports.
In fact, the most likely reason for increased retail sales figures is all the store closings!
Since the survey only surveys open stores, if 20% of stores close then the remaining 80% could report increased sales even if total sales are down. Making the reading that looks like increased retail sales totally misleading.
The problem with all this fudging of numbers in order to maintain confidence is that capital investment will be directed inefficiently as its being invested based on false information. One of the competitive advantages of an advanced nation is supposed to be the better information available so better investment decisions are made.
They seem to be determined to push the US down to 3rd world status by every means possible
I know people who have walked away from first and second mortgages, which equals more income to spend (renting is cheaper). Others have stopped carrying 7K in credit card debt, which gives them another $400, or more a month in income. Which you guessed it they spend! I think you will find as the amount of debt goes down people have more to spend not less.
What you forget is that homeowners who have paid down credit card debt have also lost most of what constitutes their life savings - the equity in their homes.
So while their cash flow will increase from paying down credit card balances, they will be forced to put most of that back into savings to make up for their lost equity. Hence, no real increase in spending.
This is not just a simple deleveraging exercise - it's also about wealth recovery. Not a typical exit from your usual recession.
I disagree. The people who are paying down credit card debt don't have savings. Those of us with 401k's and savings don't pay interest on credit cards. So for that group (lower to middle income) of people once they pay down, walk away or file chapter 13, they start over. Wash rinse and repeat.
The upper middle classes on the other hand have already recouped all off their losses and are now spending again too. Record bonuses don't you know!
It just leaves the middle what 20% of us that are hurting!
There are no bonuses except in financial services.
The middle to upper management at the high tech company I work at got ~30% of base pay. Execs took in 5 to 20+ million each. I got 2.2% and no raise next year! I've seen the same at the last two manufacturing companies I've worked at. It's not just the financial services. But they certainly do get more.
The money has to come from somewhere ... how about the Bill and Melinda Gates Foundation, spending madly to keep Buffet's estate value up?
Your hypothesis is very likely the case. Many retail sales organizations only report "same store" sales comparisons. If a store went out of business it is removed from the mix rather than zeroed out. This makes a kind of sense - retail sales organizations are only interested in actually open stores. However, more state sales tax data is coming in and it is showing an overall decline as well.
December total retail sales will prove to have fallen when all the data is actually available. As I explained to my wife using a hypothetical example, if sales totals for the prior year for 1000 stores were, say $1 trillion, and 10% of stores closed (to 900) and each remaining store saw 3% average growth, then total sales for this year would be %927 billion. The remaining stores are all doing a bit better but the economy as a whole took a 7% hit.
Previous analysis of retail sales data that I've seen have confirmed this pattern - fewer stores doing slightly better than last year. This also means fewer employees and lower facilities costs so profits might even go up versus last year. But such a process is ultimately destructive. You can't cannibalize yourself to infinite wealth.
Its all going to the govt credit card, which is about to explode.
The message: Either spend yourself into debt slavery or we will spend for you and raise your taxes, not to mention reduce your buying power with massive inflation.
There is a better case for revolution now than in 1776. Wake up people!
I used to argue this meme on TF...if you will not borrow, the gov't will step up and do it on your behalf whether you like it or not.
This is the Argentina Model.
Here here.
The stock market ignores.......credit use is declining...incomes are stagnant....so what drives consumption......oh ya...inventory rebuild...and who buys the inventory......??
Anecdotal, but...
A automotive parts plant nearby, small, didn't lose anything in the last round of bankruptcies, cut production. Their suppliers cut production. Everyone sold off all their inventories. Skeleton staffing, if any cash kept the R&D guys around.
When Ford came up with some orders in Oct/Nov last year, no one had any of their materials in stock. Everyone had to spool up production from nothing. There are minimum order requirements, or logic at least where you don't fire things up unless you have a run of a certain size.
So the jump from nothing to minimum was large, significant, and politically noteworthy. Like someone shutting the lights off, then on. Or 60% of them on.
But employment remains low, these places aren't fully staffed, production capacity isn't tapped out, or anywhere near, Receivables is watching like a hawk for any weakness, etc.
I think the economy is settling in to a new normal. With 63% of people working, people eating, driving to work, etc. there is some consumption. Everything will be down I would guess 15% or so from the highs, and settle there.
Derek
ok... so when does the market tank? all this is bordering on the surreal; not to mention Leo's childlike bullishness reminiscent of someone who lost out on the tech-bubble.
just buy chinese solar stocks and shut up
Leo
I've had my toes in a little already, but it's time to sell ALL rips from here on out, likely for the next two years. Yeah, we might pop a little higher, but it's GO time as far as I'm concerned as the risk/reward ratio has tilted far in the bears favor.
China will be a big part of the shortfest too. Puts on FXI, short XPP, whatever.
Repeat: SELL ALL RIPS.
Take that , CNBS.
I am John Connor
Its the sucking vortex of deflationary doom.
And we have liftoff. Hurry, everyone buy in before ES ramp up Monday!
Hoard, bitches! ! !
I am not Chumbawumba.
Hoard, bitches! ! !
I am not Chumbawumba.
the market must believe lower credit is good in that it is bad enough to keep the Fed on hold and spur more Federal debt to further destroy the federal balance sheet but that's ok because at least it isn't a stock.
More great news for the bulls, no doubt.
Seriously, WTF!!! I've completely lost the thread of what's good and bad. I work for a large sportswear brand and our sales are still collapsing. We're still laying off...not hiring. The other largest worldwide brand accross the river...doing the same. If these #1 and #2 global brands are tanking on lower consumption...then the consumer is truly tapped. Unfortunately, I too can only conceive of one buyer who is willing and glad to step into the market at this point in time regardless of valuations or potential losses. Uterrly surreal is right. We're now in Vegas playing against the house. You only choices are to go along for the ride or stay the hell out. "thinking" at this point will get you in a lot of trouble.
You a fellow Portlander?
In my area there are loads of gas stations that are running out of gas. Are other areas of the country having similar problems? Is some being siphoned off to fill strategic reserves? Are store owners too poor to purchase gas? Is a refinery down? WTF is going on?
I've not heard of such a thing. What's your locale? I'm in Upper Midwest. All the gasoline you want at $2.719, or so it seems.
It's because the big banks just went through a round of raising everyone's APR's.
My friend's APR went from 9% to 21%.(Citi)
Mine went from 12% to 15%.(Wells)
This isn't because the credit risk changed, its because the banks need more money.
Yeah, my vanished HELOC is part of this statistic.
Only reason I can imagine for the last 10 minute liftoff for the markets is the news is so bad that it assures free money to WS for the remainder of 2010 and maybe more.
Is it just me (or just my area) or have Home Depot and Lowes been exceptionally empty lately? It became really noticeable yesterday when I was in Home Depot during the middle of the day. Its no exaggeration to state that there were way many more employees than customers in the store!
Same here in the upper midwest. It's easy to get service these days. And drywall is in stock. (surprise, surprise. not just the killer Chinese variety either.)
Same thing in Seattle. Employees just waiting to help you, checkers standing around. And this was on a weekend.
From Seattle, but was in Calgary over the holiday. Helped my wife's Dad fix a busted tub spigot and the Home Depot there was the same way--more employees than customers.
upstate New York, Home Depot and Lowes are dead....you can see the look on employees faces. in fairness, I've not been to either on a Sat/Sun in two months. My visits are during the week (day) and what astounds me is the lack of contractors buying, picking up etc.
The stores here in CA seem to have alot of foot traffic but no sales. Just people looking. I figure they are the shopaholics with empty pockets.
And yes, even during Christmas the shelves were packed with unsold merchandise. I went into Walmart last weekend and their garden department was packed with unsold Christmas inventory no one will buy even marked down over 50%.
These sales reports have to be fudged based on my observations during December. Consumers do not have money too spend period!
Me Missus is one of those recovering shopaholics. She's repeatedly pledged to spend nothing and succeeds most of the time.....I think. Yet I know that she is like the recovering dry alcoholic who visits the bar with friends just to hang out and drink Diet Coke.
The big tell that she's fallen off the wagon would be lots of new expensive looking shoes I've never seen before. She collects them, all hoarded away in original boxes in several closets, under beds, trunk of the car, etc. Like Imelda Marcos.
So far so good. One day at a time.
Same here. Its been slightly busier the last couple of weeks but as far as i could see home depot has taken a massive hit in sales volume going back months.
Market totally rigged. They drove the DOW and S&P 500 into positive territory just before the market close.
No shit.
I can't wait for 10 years from now when we really discover the truth about this market. It borders on absurd, to now taking on a mystical appearance. The reverse correlation between the market and the USD is now proven to be bullshit as the dollar goes up, so does gold, half the fucking world gets laid off and Ford Motor company gains another 3%.. while the S&P keeps chugging higher. WTF???????
I swear, the news would come out that we just nuked Iran and the market would belch a little and keep climbing while some asshole on CNBC tells us how Boeing is making less planes than ever before that is why it's a strong 'BUY' in 2010...
I get a kick out of the steel stocks. Who the hells building anything. Or the damn airlines. United Airlines is up over 60 percent since the beginning of December, and it even goes up when oil is going up. Nothing makes sense anymore.
Trust what you know is correct. Don't be fooled by the rope-a-dope.
Shitstorm approaching.
Agree totally crosey. As a trader I kind of like it, but it's getting harder and harder to buy a stock that looks like it should have crashed a month ago. I've been suspect of this rally since April, but it keeps going up. You can't fight the tape.
The Najarian guy on Fast Money just said "US Steel is going up so good it's unbelievable." Yes, Pete, it is unbelievable. It seems everything we are witnessing is unbelievable.
And this happened during the Xmas shopping season ? Green Shoots indeed !!
consumer credit plunges, historic.
cali declares state of fiscal emergency.
jobless report this a.m. horrible.
market goes up.
An audit of the FED is no longer needed. These types of events have happened so many times over the past several months that it is obvious that no human being with a rational mind AND THEIR OWN MONEY AT RISK would be buying long.
I'm serious, I no longer need to support an audit of the Fed. I've seen all the proof that I need. Don't forget to watch the futures late sunday nite, early monday morning. they are up 80% of the time and that is where the gains are made.
they are purposely creating yet another (echo) bubble, it is not economically productive but simply a way to stealthily recap the banks.
Urge your friends and loved ones to get out of US equities, it is a Ponzi scheme.
Deadhead....
So well put, I wish I would have said such.
Its about time to get out of the market.. I thinks
Buy gold and silver, food and ammo.
Have you looked at the shelves in any store that sells ammo. I defie you to find regular handgun ammo, but if you do the price has trippled
I was at Academy sporting goods in San Antonio last weekend. Plenty of shotgun shells. Not cheap. I won't be using mine to shoot skeet, that's for sure.
Rambling thought...what if TPTB have contrived all of this to, 1) decimate the US economy and, thus, remove it from terrorist crosshairs, while 2) nuking the global economy in a sardonic last-laugh, while 3) preparing to rebuild as the world's premier fascist state ruled by the select political and financial elite.
Would it make for a great screen trilogy? Witness/relive the death of your own prosperity! Coming soon to a (propaganda) theater near you.
it's not hypothetical...it is real.
Borrowing less is exactly what consumers should be doing -- they have a long ways to go to get to where they should be. Lending less is precisely what lenders should be doing (fixing their balance sheets). Obviously all of this reduced borrowing / lending is not good for GDP - now and for years to come. But it is the right way to correct for years of over borrowing / lending -- sorry folks that party is over.
Investment asset pricing has stabilized over the past year and rising in a number of areas. There are conflicting forces of private sector deleveraging while the public sector (govt) is leveraging as fast as it can. Public sector is "winning" at the moment (which spills into asset prices rising), but obviously can not continue indefinitely.
At some point the bond market will revolt. So the only real question is when will they revolt and what will be the catalyst. Despite all being in the pot and the water getting warmer, few have decided to jump out.
this is definitely hyperinflationary. right?
snicker, snicker.
The response by the government and Federal Reserve to collapsing credit markets is more important. All aboard the helicopter!
Stats like this only confirm what I am now completely convinced of - that is, efficient market theory concerning stock markets is completely naive.
Consistent with "socionomics" or the building blocks elliott wave theory -- markets are only a representation of prevailing social mood - be it disinterest, delusion, or any other mood.
That - and equity markets are dominated by "game playing" managers that could care less about the size of declines in their managed portfolios as long as everyone else takes the same losses -- however, it would be death to not participate in so much as a 0.5% "rally".
A commentary really on a country full of ignorant sheep -- allowing so called "experts" (con-men) to manage their wealth.
I could care less what the market averages do -- it's just depressing to watch a collapsing system of american finance -- and see that basically nobody cares enough to do anything different -- got to just "play the game" -- the modern american motto!
Stats like this only confirm what I am now completely convinced of - that is, efficient market theory concerning stock markets is completely naive.
Consistent with "socionomics" or the building blocks elliott wave theory -- markets are only a representation of prevailing social mood - be it disinterest, delusion, or any other mood.
That - and equity markets are dominated by "game playing" managers that could care less about the size of declines in their managed portfolios as long as everyone else takes the same losses -- however, it would be death to not participate in so much as a 0.5% "rally".
A commentary really on a country full of ignorant sheep -- allowing so called "experts" (con-men) to manage their wealth.
I could care less what the market averages do -- it's just depressing to watch a collapsing system of american finance -- and see that basically nobody cares enough to do anything different -- got to just "play the game" -- the modern american motto!
so now the ameikans are saying no more to high interest rates, no more to monthly payments....the shine has come off of the credit card pumpkin now. the amerikans are learning to live within their means and buy only what they need, not what they want. they are being dragged kicking and screaming into the real world.....and it is only beginning now......
Yeah, that's one way to put it. What's your point?
Considering that about 50% of our population reports to being 2 paychecks away from the street, we got BIIG problems ahead.
Forget the growth--we cant afford growth. Everyone needs to be in hunker down mode right now!
FROM: PPT
TO: GS, JPM, CNBS
Subj: Ops order, 08Jan2010 (0600ET)
0830: Jobs report -- horrible (as you've known since Monday)
0831-1000: Allow small fry to bet on market collapsing on what was once known as an economic "fundamental"; CNBS keeps Santelli under control
1001-1100: Pump market to narrow range w/i -0.25% of Thur close, take small fry money
1100-1515: Hold narrow range while CNBS provides inane banter, distracts w/ gadgets from Consumer elec show, Aussie babe
1515: POTUS speaks (CNBS covers), subject TBD and irrelevant
1530: CNBS reports collapsing consumer credit (2nd stringer only, not MB!), while on-screen crawl reports "market up every day in 2010 so far" and "VIX lowest in 18 months" to confuse "investors"
1531-1600: Use unlimited UST/NYFed authority to insure positive close on bad news, take even more small fry money
NLT 1700: Wire one-half of daily profit to UST via UBS Caymans account(s) - max $100M/account
1730: LS leads TS/SCI principals-only secure telecon debrief (w/ BB and TG monitoring), prebrief Mon gameplan
1800: JC applies more virtual lubricant to unwashed masses
lmao ... brilliant
Non of this is surprising to any mid westerner (especially from Michigan) since we've been seeing this trend for the past 9 years. The US lost it's way when it was convinced that the driving engine of the economy is no longer manufacturing and export but instead importation and consumption.
S&P 500 at 18x earnings...so what remember 1999...how about 40X earnings? I would like to hear why not given the unprecedented amount of stimulus and total market complacency
I have a feeling this is the new economy. Consumers don't matter anymore. The government is using taxpayer money to flashtrade stocks. The economy is no longer about spending, Credit and jobs, it's about making sure the stock market sees green everyday through taxpayer money. Sad, But true. In other words, The value of this once great nation is nothing but clicks on the GS Computer. Something must be done. There is no economic recovery.
SPOT ON.
There are no investigations because TPTB know they have to cover up the cover ups, or the whole PONZI is exposed. They have shown already, they will lie, cheat, steal and do anything to prevent the truth from being revealed. Gotta keep those plates spinning at all costs--
Gold, Silver, Food and Ammo
the govt/fed is pumping in 3-5bln a day into our markets in one form or another. If you are an institutional money manager of any kind, you have no choice (in most cases) but to put almost all of this money to work. Your choices are limited: loan to broke people at horrible rates, loan to businesses at horrible rates, or put money in stocks.
Dont over think it...until this gushing liquidity event stops, the market will go up. Its getting more and more obvious to mom and pop, and so we may see an exponential rip here as everyone sees that its not stopping.
Barring an extension of current stimulous/bailout packages, much of this liquidity vanishes in March. Just one data point. But, it could be the only one that matters.
The idea behind it is the wealth effect created by rising markets. Fed/treasury hope that consumption will go up, that's why they push and push with trllions of $. The result of all these manipulations ? it's a mess everywhere and nobody understands what's going on. S&P at 1150 is a joke, but it could easily go to 1300 before a correction. In 25 years in the business, I've never seen such a unlogical market. One thing seems sure:
IT WILL END IN A DISASTER !
qe is perpetual motion....nothing is ending in
march.
STOP SPENDING
START SAVING
Buy Gold, Silver, Guns and Ammo---
Can you say "Financial Katrina" dead ahead??
Consumerless recovery?
More hubris from an administration that hired an actor to read policy statements from a teleprompter.
I voted for this administration, and am freaking out!
I am just seriously shocked that there are not millions of people in the streets of DC screaming about this bait and switch! The level of complacency is erie, isnt it?
Who knew such a smart man would allow himself to be bought off so quickly and completely by the banking cabals?
HE found out on the campaign trail and comfortably complied.
Obama has NEVER stood on principle for anything. He is a mile wide and an inch deep - only "articulate and clean." And you are surprised by his Presidency???
Sadly, the ability of voters to size up people is so bad that this is what you get. No one who is capable of thinking should be surprised about any of his actions or non-actions.
Anyone who noticed how easily he'd been bought in the past? If you didn't expect this, you weren't paying attention.
Last summer, there were millions of folks
screaming in DC. They were ignored.
Don't freak out too much, you could have voted
McCain, and I don't think things would be
much different....
Honestly folks.. the US makes my home country (India) economic policy look like "GOLD" !! I am buying the rupee like crazy !!
I've been posting for a few years that you can't spend what you don't have. Even if you have a job and some kind of income, it's not keeping pace with inflation. Although the government and the media have ignored rising prices, the cost of basics keeps going up. Then add rising school/property/additional taxes, and no one has much discretionary money available to buy things.
The only way I've kept afloat so far is to not buy anything new except food and underwear. Everything else I own was bought second hand. And still I can barely pay the utility bills. I'm surprised that even more stores haven't closed down.
It's not a revolt, banks are lending. And why hasn't the market moved one bit? Which should be down... well, that's because we've created a new bubble and when the fever strikes, greed is blind to reality. The markets will continue to rise and is on another upwared 10-year cycle.
Look, this wasn't a revolt, this was entirely predictable
and I did predict it for November. Here's the explanation:
B of A raised their card rates to 16 %, Citi raised to
29.9 % back in October.
This forced folks to either pay off the cards or default.
(november also held a record number of CC defaults)
My wife had a 15K balance which she could no longer "kite"
to another card, the offers just were not available.
(FWIW, both of us have over 800 credit ratings)
Interest on her card was 200 bucks a month, and therefore
I paid it off for her, being disgusted by the banks
and not wanting to see her financially raped.
I really believe the explanation is that simple. High rates
forced record payoff's and default's
Expect more for december, probably weighted heavily to the
default side.Those who could pay off already have
what is the purpose of a good credit rating? so you can go buy things on credit? see my point. the new paradigm is coming. consumers are going back to paying cash and the post world war 2 syndrome of buy now, pay later is ancient history now and it should be.
"Quants 1: Efficient markets 0."
How many days since March 9th? (my birthday, btw, easy to remember) 300+/-? Shouldn't that be Quants 300: Efficient markets: 0?
http://www.chron.com/disp/story.mpl/metropolitan/6785449.html
mexicans going back home?
Sometimes I want to pull the rest of my hair out.
I am not an educated man. I do have a lifetime of experience, and did fairly well for a semi dummy................but.
How much grey matter does it take, to understand that with 20-23% of our USED to be working(Income Tax Paying) class out of a job, and with little fiat currency they do have left, they are hanging onto to eat, and heat, and just GET by?.
The most sad part of this, is they are clueless, and when their fiat currency goes to ZERO, what will they do then?.
Will we still be bombarded with news, about people not spending?.
Lord above, help me...................these talking heads, and dimwit so called Journalists, are killing me.
There is a blatant data entry error on the G19. Column AC on the downloaded SA version repeats the June through November 2008 exactly at June through November 2009. "Consumer Revolving Credit Owned by Nonfinancial Businesses, Not Seasonally Adjusted" has last years numbers.