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Consumer Credit Reveals 26th Consecutive Decline In Revolving Credit, Ex-Student Loans Consumer Credit Drops $28 Billion

Tyler Durden's picture




 

Today's consumer credit release tells you all you need to know about who continues to fund the economy (deficit commission be damned indeed). The all important revolving credit number declined by $5.6 billion in the month, which just happens to be the 26th consecutive drop in revolving credit, as in the stuff that Americans use to actually buy stuff with using their credit cards. And while October total consumer credit rose to $3.4 billion from a downward revised $1.2 billion in September (previously $2.1 billion), all of it was due to non-revolving credit, which rose by $9 billion, and more specifically due to a whopping $31.9 billion increase in Federal Government debt used to fund student loans (the latest industry recently nationalized by the US government). Ex-federally funded student loans, consumer credit declined by about $28 billion.

The charts below are self-explanatory.

 

 

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Tue, 12/07/2010 - 16:50 | 786855 HarryWanger
HarryWanger's picture

And may I add:

"Gains in non-revolving reflect strong demand for vehicle loans which based on last week's solid unit vehicle sales are likely to show strength in the November report."

In other words, people ARE buying big things, like cars for example. You don't buy a car if you're "worried" about the economy.

 

Tue, 12/07/2010 - 16:52 | 786864 Cheesy Bastard
Cheesy Bastard's picture

Unless you need it to live in.

Tue, 12/07/2010 - 17:35 | 787051 Ancona
Ancona's picture

+10

;)

Tue, 12/07/2010 - 16:53 | 786870 Tyler Durden
Tyler Durden's picture

Wrong again: government merely funding intermediary dealer purchases of (mostly domestic and recently IPOed) vehicles as end demand refuses to materialize. Also known as channel stuffing and inventory hording. Let's see: 27,000 cars stuffed at about $12k average loan per car... There's your government's dollars working overtime for you.

A for effort though.

Channel Stuffing At GM?

Tue, 12/07/2010 - 16:57 | 786896 HarryWanger
HarryWanger's picture

What does vehicle inventory have to do with more people obtaining credit. The point is, people are getting credit to buy new vehicles. Sure, inventory may be up but the point here is credit and credit is reflecting demand for vehicles. Right?

Tue, 12/07/2010 - 17:01 | 786920 Tyler Durden
Tyler Durden's picture

You know, there is a thing called google: Dealer Floor Plan Financing Program

Tue, 12/07/2010 - 17:03 | 786928 SpeakerFTD
SpeakerFTD's picture

I am also embarrassed to admit how much I love watching HarryWanger get faced.  You made my day, Tyler!

Tue, 12/07/2010 - 17:06 | 786943 johngaltfla
johngaltfla's picture

I'm not embarrassed. It's sort of fun. Like watching the opponent's team mascot falling into a woodchipper.

Tue, 12/07/2010 - 18:13 | 787175 LowProfile
LowProfile's picture

+1 I actually LOLed!

Tue, 12/07/2010 - 17:09 | 786954 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

Ditto.  Does he reply with a characteristic nothing, or a craven apology only to appear in the next thread with aggressive accusatory rant sure to lead to more hilarity?

Tue, 12/07/2010 - 17:04 | 786934 Spalding_Smailes
Spalding_Smailes's picture

Tyler, a chart on the silver crash below $29.

Tue, 12/07/2010 - 17:07 | 786945 Tyler Durden
Tyler Durden's picture

As requested:

In all seriousness, rumor that Wolverine Trading went tits up and was liquidating everything, and was the catalyst for the ES dump just before 3 pm.

Tue, 12/07/2010 - 17:10 | 786957 Cdad
Cdad's picture

LOLOLOLOLOLOLOL!

Wooooootinany!

Tue, 12/07/2010 - 17:22 | 786978 papaswamp
papaswamp's picture

Comes down a bit more and I will go on another buying binge....

 

and wow that is one heck of rumor.

Tue, 12/07/2010 - 17:19 | 786985 Spalding_Smailes
Spalding_Smailes's picture

Can you use a chart that updates (5 min -Finviz) ?.... It will not stop falling !!!

Now $28.50

Tue, 12/07/2010 - 17:42 | 787076 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

But gold is up $2 in the last 20 minutes!

 

Tyler, graph it on a logarithmic scale quick!

Tue, 12/07/2010 - 18:54 | 787282 Hephasteus
Hephasteus's picture

But wolverine trading has unwavering integrity and proprietary algorythms. They should at least be able to outlast the JP Morgue.

What happened. Hippies are supposed to drop out and drop acid. Not drop out and buy silver and blow everything the SEC won't regulate to all hell.

Tue, 12/07/2010 - 17:14 | 786966 Joe Davola
Joe Davola's picture

In these days of free ponies for all I'm sure the program was extended beyond the initial date of Sept 30, but I don't see anything on the SBA site stating it has.

Tue, 12/07/2010 - 17:05 | 786936 johngaltfla
johngaltfla's picture

Man, you are fun to watch being p0wned.....

Tue, 12/07/2010 - 17:11 | 786962 SheepDog-One
SheepDog-One's picture

In the FACE Harry!

Tue, 12/07/2010 - 21:50 | 787721 Cursive
Cursive's picture

@HW

I work at a car dealership.  NEW AND USED ARE HURTING FOR BUSINESS!  I'm hearing the same from friends at other dealerships.  Gotta rely on the Service and Parts sales.

Tue, 12/07/2010 - 23:57 | 787979 prophet
prophet's picture

Listen carefully, to what you are saying.  I'm sure it makes perfect sense to you.

Tue, 12/07/2010 - 16:54 | 786879 docj
docj's picture

You don't buy a car if you're "worried" about the economy.

Seriously?  There are literally billions of reasons why people buy cars, Harry - they break, for example - that have precisely nothing to do with worry (or not) about the economy.

Holy crap, man.  Do you talk with anyone who doesn't work in the finance industry?

Tue, 12/07/2010 - 17:31 | 786971 centerline
centerline's picture

OK, here is a sad story.  I personally know someone who had to replace a vehicle.  They had no cash whatsoever.  It is all gone trying to stay alive.  Savings kaput.  And no other credit lines to pull from.  So, this person wound up getting a cheaper new car instead of a used car (or fixing the first one) because the new car could be financed at a lower rate without any money down.

 

Post edited...

Tue, 12/07/2010 - 18:33 | 787224 MachoMan
MachoMan's picture

I begrudgingly bought a new camry...  hell, the prices on used cars are painfully close to new...  ok, so for ~$5k difference I get 35k+ less miles and no lardass eating cheetos/semen in my car...  I go ahead and pony up the extra clams.  It was a really, really shitty feeling, but I had to pull the trigger after totalling another vehicle.

Tue, 12/07/2010 - 18:46 | 787267 centerline
centerline's picture

Found that out myself when I had to put a good chunk of change into my wife's car.  Was shocked to see how small a difference in price there was.  No easy answer.  I felt horrible having to put a big wad of money into repairs.  In my case, car was repairable - so I am looking at it from a risk perspective.  In the case of a totaled vehicle, if not deciding to get a beater for awhile, the choices are not that good between used and new unfortunately.  Sorry to hear about your dilemma.

Tue, 12/07/2010 - 21:58 | 787745 Cursive
Cursive's picture

MachoMan drives a Camry?  Buzzkill....

Wed, 12/08/2010 - 11:09 | 788691 MachoMan
MachoMan's picture

I don't, the wife (Mrs. Elizabeth if you will) does...  she was also the one who wrecked...

Tue, 12/07/2010 - 17:24 | 786986 Idiot Savant
Idiot Savant's picture

Pay attention here Harry, as I'm the perfect example. My car finally died on Thanksgiving. I took delivery of my new vehicle last Saturday. Did I want to buy a new car? No, but I need reliable transportation. I considered paying cash, as I hate paying interest. However, due to my concerns about the economy, I decided I'd rather pay the interest and keep my powder dry.

Hell, even CNBC backs up what Tyler is saying.

http://www.cnbc.com/id/40554201 

More auto loans going to subprime buyers

http://www.google.com/hostednews/ap/article/ALeqM5jHFgDgIfxH0KtnPyMLGyI17HZKeQ?docId=c6669d4119194e08ae304bacd5a1e838

Tue, 12/07/2010 - 17:28 | 787023 HarryWanger
HarryWanger's picture

The point is, credit is up and some of that is from people, not the government or space aliens, obtaining credit from banks to purchase autos.

Even your CNBC example backs that up:

Some of the strength last month also came from a rise in auto loans, reflecting stronger auto sales.

So thanks for making my point stronger with yet another quote from another source.

Tue, 12/07/2010 - 17:36 | 787053 papaswamp
papaswamp's picture

...subprime autoloans...which saw the largest rise since 2007. 

Tue, 12/07/2010 - 17:50 | 787112 ghostfaceinvestah
ghostfaceinvestah's picture

I don't see anywhere in the Fed data that backs up the assertion made by both you and CNBC.  Nothing in the data suggests auto loans increased this past month. ex-the federal government, non-revolving credit was down.

Wed, 12/08/2010 - 00:02 | 787992 prophet
prophet's picture

They are not sales, they are loans!  What a bunch of twisted ..., well never mind, you just go on doing what you do best. 

Tue, 12/07/2010 - 17:37 | 787063 centerline
centerline's picture

Edited my post above to be more fair.  The logic you are using is in essence the same argument I have been pushing over the last couple of years.  That is, not knowing what is coming, it is better to stay liquid instead of throwing cash at debts when interest rates are so low.  If rates rise, you can always lighten the load by paying debts down.  It's all about having the resources to service debt - not actually throwing towards the debt right now - then winding up with squat and having the system implode.  When this mess goes down, all bets are off.  Keeping some powder dry is a great idea.  Of course, you have to be able to afford the car in the first place.  In my story above, the person could have fixed the first vehicle for a fraction of the cost of the new car - but lacked the cash and financing capability to do so.  Therefore was stuck getting another vehicle which could be financed.

 

Of course, this says nothing about a healthy economy.  

Tue, 12/07/2010 - 19:11 | 787323 docj
docj's picture

Bingo.  I mean, just my own personal situation I have a pair of Priuses - both over 100k miles - both running just fine.  My hope is to get another 100k out of both of them (that's +200k total for the math challenged) before replacing the one that looks most likely to give up the ghost.  The last thing I want right now is a car payment - but that's precisely what I'm going to have if one (or, Heaven forbid, both) of my cars croaks prematurely.

HW's assertion along the lines of "people don't buy cars if they're worried about the economy" is ludicrous on its face.

Tue, 12/07/2010 - 16:55 | 786881 johngaltfla
johngaltfla's picture

Guess what sparky? The US government buys GM and Chryslers on non-revolving credit too.

Tue, 12/07/2010 - 16:58 | 786893 papaswamp
papaswamp's picture

Yea govt sponsored sub-prime auto loans!!! Weeeeee!

http://news.yahoo.com/s/ap/20101207/ap_on_bi_ge/us_autos_credit

As the article put it so well..."The percentage of loans going to subprime buyers rose 8 percent in the third quarter, their first year-over-year increase since 2007, according to a report issued Tuesday by Experian, a credit reporting agency. "

Oh yea...2007 what happened after that?

 

Loans with the highest rate of default..student loans...yeaaaa!

Tue, 12/07/2010 - 17:09 | 786951 SheepDog-One
SheepDog-One's picture

Harry back for more beatings directly from Tyler...awesome!!

Tue, 12/07/2010 - 17:19 | 786987 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Remember Mike Tyson fights from the '80s?  Yeah, it's like that.

Tue, 12/07/2010 - 17:20 | 786989 Spalding_Smailes
Spalding_Smailes's picture

Whats up with silver/gold after hours ?

 

Tue, 12/07/2010 - 17:38 | 787067 papaswamp
papaswamp's picture

Big profit taking run (unless someone is dumping). Seems to happen about every 15 to 20 days. Then is marches back up. 

Tue, 12/07/2010 - 18:41 | 787256 johngaltfla
johngaltfla's picture

Dear Hairy Wanker,

Since you don't believe Tyler, and you won't listen to anyone else here, I shall link you to a liberal website called The Atlantic, which says everything everyone has been trying to tell you in this story:

Government Helps Boost Consumer Credit in October


Enjoy your p0wnage.

Merry Christmas,

John

Tue, 12/07/2010 - 18:43 | 787259 Panafrican Funk...
Panafrican Funktron Robot's picture

http://research.stlouisfed.org/fred2/series/CONSUMER?cid=100

Yeah, consumers are looking super duper confident in the economy. Hence the 105 billion dollar drop in consumer borrowing since the February 2009 peak.

Tue, 12/07/2010 - 16:56 | 786885 BORT
BORT's picture

Going to college on the Fed is the new CCC.  At least in the CCC you got paid and didn't owe anything at the end.  Parents also telling kids they aren't going to foot he bill to learn how to be a meeting planner

Tue, 12/07/2010 - 22:02 | 787753 Cursive
Cursive's picture

Now we know why Benron made a mention of "education" gaps in the awful Scott Pelley interview.  Indoctrination of new debt slaves.

Tue, 12/07/2010 - 16:56 | 786890 ElGuappo
ElGuappo's picture

I think it is GE that is buying 30,000 GM Volts. I have cash but in no way buying any NEW car.

Tue, 12/07/2010 - 16:58 | 786903 Shameful
Shameful's picture

Ah perpetual indentured servitude via student loans is alive and well.  Already past the point where it's a positive ROI for most, and with the vig running might as well be slavery.  Going to get real interesting in a few years.  Going to have a hoard of massively indebted, unemployed, young people with no way to pay or clear the loan. 

Tue, 12/07/2010 - 17:05 | 786938 moldygoat
moldygoat's picture

They can work it off in FEMA labour camps. Their reward for a good ditch dug will be access to the TSA "best of" photos.

NBD

Tue, 12/07/2010 - 17:21 | 786991 Shameful
Shameful's picture

Guessing that with the attitudes of our bureaucrats, politicians, and oligarchs that the reward post ditch digging would be a bullet in the back.  I'm half expecting some bailout program or special service program to cover the student loans.  The Stasi isn't going to man itself after all.

Tue, 12/07/2010 - 17:20 | 786990 Ragnarok
Ragnarok's picture

So, your not going to buy a house? Fine go get your PhD.

 

Regards,

Your Debt-Slave Masters

Tue, 12/07/2010 - 20:45 | 787562 PolishHammer
PolishHammer's picture

Actually PhDs are all funded.  If they get any additional loans it is to buy their iphones and kindles.

Tue, 12/07/2010 - 17:24 | 787011 centerline
centerline's picture

+1... going to get ugly.  Anything that is driven by fears of failure will get a whole further into bubble territory before going nuclear.

Tue, 12/07/2010 - 17:01 | 786919 digalert
digalert's picture

We need a cash 4 clunker credit card program.

Tue, 12/07/2010 - 17:12 | 786933 virgilcaine
virgilcaine's picture

Have a cof and amx card, neither are used.

You know where Obama is going with the lifer Unemplyed's don't you?  A work camp of some sort. His personal slave colony, or forced free labor at Walymart.

 

 

 

Tue, 12/07/2010 - 17:14 | 786967 Pure Evil
Pure Evil's picture

Strange, Yahoo Finance is trying to spin the consumer credit news in the opposite direction.

 

"Consumer credit jumps by most in more than 2 years- AP

Consumer borrowing rose in October by the largest amount in more than two years, led by a big rise in the category that includes student loans."

 

I guess the economy is making a come back in the jobless recovery. If you can't work, go back to school to earn a worthless degree and go deeper into debt to boot. Sure hope there's a shit load of jobs waiting for these new graduates when its all over.

Tue, 12/07/2010 - 17:22 | 786994 centerline
centerline's picture

The education bubble is still going strong.  Everyone being convinced that the ticket to a job is higher education - or trading up a degree in underwater symmetical bb stacking for something useful like engineering.  The crappy part is that the jobs aren't coming back.  Adding insult to injury, the cost of that education now is so high, you would have to work for near a lifetime (assuming you actually found a job) just to pay back the loans.  When the education bubble pops, it is going to be nasty.  Student loan defaults are going to eventually become another subprime.  I suspect though that this will be one of the last bubbles to pop though.

Tue, 12/07/2010 - 17:32 | 787035 Duuude
Duuude's picture

What happens if the student does not make payments on the loan ?

Tue, 12/07/2010 - 17:38 | 787065 Shameful
Shameful's picture

Means that they have a huge future claim to all income.  And the fees and intrest keep coming during default.

http://www.nolo.com/legal-encyclopedia/article-29859.htm

Tue, 12/07/2010 - 17:43 | 787086 centerline
centerline's picture

Not sure.  But from what I understand, many times the parents are co-signers on these loans.  I would think there is some sort of colateral on most loans.  I am just not knowledgable here in the details...

Tue, 12/07/2010 - 17:51 | 787116 sabra1
sabra1's picture

then it's total recall time!

Tue, 12/07/2010 - 20:47 | 787571 PolishHammer
PolishHammer's picture

Their wages will be garnished.  If they have no wages then it's basically suspended reality.

It's quite frankly horrible.  If you can live outside the USA you can go to Asia teach english or maybe do something in Europe or Brazil...there you can start a new life.

Tue, 12/07/2010 - 17:33 | 787042 Shameful
Shameful's picture

The problem with student loan defaults is you really can't clear them.  Once the disaster happens it basically stalks you the rest of your days.  Best thing to do at that point is leave the country.

I know I'd love a default mechanism, but they probably won't do it because every student would default.  Why not slag the credit to clear the debt for an asset already consumed?

Tue, 12/07/2010 - 17:53 | 787122 ghostfaceinvestah
ghostfaceinvestah's picture

Exactly.  Student loans are a pure form of debt slavery, unlike credit card debt, home equity loans or mortgages in many states.

Tue, 12/07/2010 - 19:14 | 787329 Eternal Student
Eternal Student's picture

Actually, there is a very simple way to cure a student loan default. Emigrate. I fully expect to see a lot more of this in the future. Truly a sad state of affairs for this great Country.

Tue, 12/07/2010 - 20:49 | 787575 PolishHammer
PolishHammer's picture

From experience, the english teaching markets in Taiwan and Thailand are pretty freakin saturated with Americans.

Tue, 12/07/2010 - 22:17 | 787777 docj
docj's picture

Completely OT, but as you and I have been here about the same amount of time I cannot believe this is the first time I've ever offered you a +Infinity on the Avatar and User Name combo.

Well played, sir.  Well played.

Tue, 12/07/2010 - 22:08 | 787761 Cursive
Cursive's picture

One hand washes the other.  Ever since he opposed candidate Obama, Immelt has been sucking up big time looking for each and every bit of largess he can bring to GE.  Anyone really think we need a "smart grid" for anything other than remote monitoring of our activities?

Tue, 12/07/2010 - 17:29 | 787025 Hephasteus
Hephasteus's picture

Everybody get all trained up for the next revolution. Let's see industrial revolution they made horrible fucking weapons to kill us with. Information revolution they made spying easy and horrible fucking games and movies.

I sure hope the next revolution involves poisons and gene therapies and drugs though that revolution seems to keep rolling in the background behind every other revolution.

Take an accounting class and some math classes and build your prison bitches.

Tue, 12/07/2010 - 18:19 | 787192 Mrmojorisin515
Mrmojorisin515's picture

anything that recieves any sort of funding is in a bubble ex. Healthcare, Higher education.  They will burst and when they do, i can't wait to point and laugh at unemployed college proffesors, hopefully paul krugman

Tue, 12/07/2010 - 18:51 | 787278 centerline
centerline's picture

Government push/backstop into anything creates it - like you said.  Bubbles everywhere.  Sort of like one of those cartoons where someone strikes a match to see in the dark and finds themselves surrounded by explosives...  ha, ha.  The last couple of years have sure been a "oh shit" moment.

Tue, 12/07/2010 - 20:36 | 787535 JoeStocks
JoeStocks's picture

From Seekingalpha/marketcurrents

03:15 PM New figures show that many car loans are going to people with questionable credit. The percentage of loans going to subprime buyers rose 8% in Q3, first Y/Y increase since 2007, Experian says. The majority of loans still goes to buyers with prime credit scores, but if banks are welcoming more subprime borrowers, it feels like deja vu all over again.

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