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Fragile Consumer Credit Recovery Fizzles As Government Is Responsible For $25 Billion Of $5 Billion Increase, Revolving Credit Drops

Tyler Durden's picture




 

After consumer credit seemed poised to be at a critical inflection point in December, after total credit increased by $6 billion, and all important revolving (i.e., credit card) credit component increasing by $2.3 billion, and the government - recently the only source of incremental consumer credit - largely absent from the monthly pickup, the January number confirmed this single month occurrence was largely a fluke, and was predicated by the already discussed consumer weakness seen in the beginning of the year. Not only did today's consumer credit update indicate last month's increase was revised lower by 33%, to just $4.1 billion (revolving revised from $2.3 billion to $2.1 billion), the revolving credit improvement is now dead and buried, after there was another drop in total revolving credit to the tune of $4.2 billion, more than wiping out last month's increase and printing the 28th of 29 consecutive monthly declines in revolving credit. Yet what is most troubling is that while non-revolving credit increased by $9.3 billion, $24.9 billion of this increase was due to the Federal Government, while the traditional source of credit: consumer banks, plunged by $15.1 billion M/M, the biggest monthly drop since the securitization-commercial reclassification in March of 2010. In addition all other holders of debt saw their notional amounts decline with the exception of savings institutions which increased by a token $345 million. Unfortunately for the Fed, consumer deleveraging is alive and healthy, meaning that the US government will need to fund the private sector indefinitely in the future, which also means monetization of the relentless surge in debt (note today's record $224 billion monthly budget deficit) will continue.

Total monthly breakdown by credit components:

And monthly breakdown by M/M change in key holders of consumer debt:

 

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Mon, 03/07/2011 - 18:44 | 1027731 Rainman
Rainman's picture

Old Hickory twitches in his grave as the evil Bank of the United States is reborn.

Mon, 03/07/2011 - 18:50 | 1027754 tmosley
tmosley's picture

Took him long enough.  It's only been 98 years, after all.

Mon, 03/07/2011 - 19:33 | 1027860 Revolution_star...
Revolution_starts_now's picture

http://www.dailykos.com/story/2006/12/07/278792/-I-killed-the-Bank

not of fan on the whole indian thing, but will give him props for the banks.

Mon, 03/07/2011 - 22:26 | 1028323 trav7777
trav7777's picture

the alternative was to end up with a vast continent of people living in huts...

Mon, 03/07/2011 - 18:44 | 1027739 Sokhmate
Sokhmate's picture

math, bisches

Mon, 03/07/2011 - 18:47 | 1027745 Quixotic_Not
Quixotic_Not's picture

Pushing on a string...

Mon, 03/07/2011 - 19:11 | 1027808 Zero Govt
Zero Govt's picture

Yep. Obamas call to consumers to spend (fail). Feds 'free' money low interest rate policy (fail). Timmy trying to 'stimulate' the economy with historic Govt spending (fail). 3 years into recession, 3 policy failures out of 3 and the only buggers still spending like there's no tomorrow is the totally socially and economically dysfunctional US Government

Mon, 03/07/2011 - 19:53 | 1027903 TeamAmerica
TeamAmerica's picture

You forgot renewing the Bush tax cuts (fail).  

Mon, 03/07/2011 - 18:50 | 1027750 Cleanclog
Cleanclog's picture

Yep. Consumer Sentiment index was at highest level since January 2008. However, it was up 9.7% for high-end incomes and down 1.4% for low-end incomes.  That may not be surprising, but I wonder how consumer confidence will look when gas prices have gone up so much since those numbers were computed.


Those that may "need" some credit won't be able to access it.  Discretionary spending to go down again.  So much for the wealth effect on the vast majority.  Sorry Bernank and QE2.  You got your higher equity prices in stocks, but a FAIL everywhere else.   Aoooga!

Mon, 03/07/2011 - 18:53 | 1027761 chet
chet's picture

Yeah, after a multi-year period of high unemployment and wage deflation, for some strange reason people had to pull out credit cards during December.  But then the spending wasn't maintained.

Hmmm, it is almost like some sort of event happens in December which causes people to make purchases, yet this spending doesn't last into the next month.

Mon, 03/07/2011 - 18:59 | 1027780 masterinchancery
masterinchancery's picture

Yes, very mysterious! Perhaps a billion dollar federal research grant might get to the bottom of it.

Mon, 03/07/2011 - 19:29 | 1027849 -Michelle-
-Michelle-'s picture

I accept the challenge.

Mon, 03/07/2011 - 19:54 | 1027906 Miles Kendig
Miles Kendig's picture

Need a research assistant?

Mon, 03/07/2011 - 19:58 | 1027916 JohnG
JohnG's picture

"Hmmm, it is almost like some sort of event happens in December which causes people to make purchases..."

 

Snow?

Mon, 03/07/2011 - 21:57 | 1028272 slewie the pi-rat
slewie the pi-rat's picture

 

JohnG:  by george!  i think you've got something, there! 

plus, the "downward revision" to December 2010, and the "shrinky-dinky" to the consumer credit can be easily explained by one word: RETURNS!!!

Mon, 03/07/2011 - 18:55 | 1027773 Logans_Run
Logans_Run's picture

All those college kids committing to more debt not realizing that their job prospects will be shit when they get out! Thank you Uncle Sam!

Mon, 03/07/2011 - 18:55 | 1027774 ghostfaceinvestah
ghostfaceinvestah's picture

It is amazing to me that the masses continue to sign up for the perpetual debt slavery that is student debt (not dischargeable even in bankruptcy).

This is a victory for the elites - dischargeable debt is dropping, but is more than made up by increases in non-dischargeable debt.

Mon, 03/07/2011 - 18:59 | 1027781 andybev01
andybev01's picture

Funny too, that you can't even land an entry-level position without a basic degree.

Mon, 03/07/2011 - 19:06 | 1027801 Cleanclog
Cleanclog's picture

Some college kids are paying for externships - that is how scarce even unpaid internships have become.  It is brutal out there.

Mon, 03/07/2011 - 19:32 | 1027859 Logans_Run
Logans_Run's picture

Yup. I have a daughter doing on of those right now. She even had to pay her own way to Nashville. They provide housing and a basic stipend. She works on average 12 hours per day. The serf generation has begun.

Mon, 03/07/2011 - 19:57 | 1027912 Miles Kendig
Miles Kendig's picture

non-dischargeable debt

For now ghost .. for now

Mon, 03/07/2011 - 20:23 | 1027969 trav7777
trav7777's picture

well, the data coming out as reported on Steve Sailer's blog shows that among blacks that get bachelor's degrees, something like 40% are defaulting.  Surely, they are getting away with it.

Mon, 03/07/2011 - 20:26 | 1027978 Quixotic_Not
Quixotic_Not's picture

No escaping student debt...they'll eventually be brought to bear in their local Federal District Court and garnishment will be ordered.

Race is no excuse, nor is it a defense...

Mon, 03/07/2011 - 20:36 | 1028038 trav7777
trav7777's picture

lol...it is in this america

Mon, 03/07/2011 - 21:29 | 1028207 cosmictrainwreck
cosmictrainwreck's picture

OK, trav, give us the stats - by race - on all defaulters who have and have NOT had judgements levied. Also, if "something like 40%" (?) of blacks default, what is rate among whites? Bad economy, have ya heard?

Mon, 03/07/2011 - 22:31 | 1028336 trav7777
trav7777's picture

check Steve Sailer's blog...surely you can find this right?  The data comes from NCES.

The 10-year rate for white, non-hispanics is like 7%.  For asians it is lower.

Look, really, you don't want to have this type of discussion with me as you will find the truth about disparities in things like this to be highly unpalatable.  Many of these defaults were DURING the boom times.  I'm sure it is higher now.  The NCES data comes from those who actually got degrees.

As the rate of graduation for blacks is abysmally low, like below 40% or so, one can only take a wild guess as to what rates those with debt who did not receive degrees are running.

Yes, yes, FICO and all the compooters is raciss

Tue, 03/08/2011 - 00:11 | 1028588 cosmictrainwreck
cosmictrainwreck's picture

I yield to your obviously superior fire-power, Sir

Mon, 03/07/2011 - 19:06 | 1027800 Mike2756
Mike2756's picture

Noticed it, that and the auto loan amount is back to 2006 levels with an ltv down to 80%.

Mon, 03/07/2011 - 19:08 | 1027805 jointhewave
jointhewave's picture

Watch the video 'AUSTERITY MEANS POVERTY FOR AMERICANS !' at (http://www.youtube.com/watch?v=leeDbHqDU8U).

Anonymous-

The SHTF in 2008 and now its going to hit again in 2011. Can't wait for the systemic breakdown!!

Mon, 03/07/2011 - 19:14 | 1027813 Miles Kendig
Miles Kendig's picture

Slam dunk the punks

http://www.youtube.com/watch?v=4TlPo0yCSa4

Meanwhile .. an 80 yr old Mooresville Walmart greeter robbed his own store by gunpoint last night.  Stimulus finally reaches Main Street USA

http://www.myfox8.com/news/wghp-story-walmart-greeter-robs-coworker-1103...

Mon, 03/07/2011 - 19:13 | 1027817 Zero Govt
Zero Govt's picture

"revolving credit" .....is that like Russian Roulette?

Mon, 03/07/2011 - 19:13 | 1027820 Caviar Emptor
Caviar Emptor's picture

My high-end friends thought they would do a little something for those less fortunate than themselves. So they paid a visit to an upper-middle class family. They were shocked by what they saw. 

Mon, 03/07/2011 - 19:22 | 1027835 disabledvet
disabledvet's picture

if the government is broke so are "the classes."  there are the "tycoons" of course--tragic in their own way as F. Scott so beautifully wrote of them.  and now "a war."  who will win this thing of course is never much talked about--and of course if you think "we're just talkin' Libya" you are "living under a rock."  monetizing the debt looks like the tip of the iceberg to me.

Mon, 03/07/2011 - 19:33 | 1027862 Caviar Emptor
Caviar Emptor's picture

My high-end friends have carefully protected their fortunes. Gold/PMs have been big. But they have squirreled money away in the four corners of the earth. Very diversified. 

Mon, 03/07/2011 - 19:15 | 1027822 buzzsaw99
buzzsaw99's picture

This is bullish, right?

Mon, 03/07/2011 - 19:20 | 1027831 NotApplicable
NotApplicable's picture

Don't worry, I'm from the government, and I'm here to help you (spend your way to bankruptcy).

Mon, 03/07/2011 - 19:20 | 1027833 Timmay
Timmay's picture

Going

Down

Down

Down......

Mon, 03/07/2011 - 19:25 | 1027844 Revolution_star...
Revolution_starts_now's picture

Dear Mr. Bernank, what are you going to do when people cheer the drop in the dow at the local sports bar? Will you cause riots here like in the middle east?

You see the thing about stealing in a manner that isn't noticed, it's hard to do if the amounts you need can't be ignored. You see we know you are only interested in pumping money into those broke whores we call TBTF. Problem is everything has limits and actions have consequences. Even if the masses think you are bullet proof, you and I know different.

Signed

The "VIG"-e

Mon, 03/07/2011 - 19:35 | 1027865 rlouis
rlouis's picture

Last night a 60 Minutes segement on homeless kids in FL was quite sad.  It's so bad that the social controllers have to acknowledge the poverty so many kids have been living in.  Their parents won't rescue our economy or china's. 

Mon, 03/07/2011 - 19:50 | 1027896 Mike2756
Mike2756's picture

That's ok, the Fed has some nflx in an account for them.

Mon, 03/07/2011 - 19:48 | 1027888 apeakunderthehood
apeakunderthehood's picture

http://apeakunderthehood.blogspot.com/2011/03/bond-smokers-please-stand-up.html

Bond Smokers Please Stand Up

Different take that we hope you find interesting and amusing. 

 

Mon, 03/07/2011 - 19:52 | 1027893 thepigman
thepigman's picture

Here's how it works and why retail

sales are going nowhere. They max

out their cards for purchases and since

the banksters are not about to give them

additional credit, they can't purchase

again until the balances come down...

60-90 days later. Little tiny credit mini-cycles,

net YOY sales going nowhere.

Rinse, wash, repeat, for about 10 years.

Mon, 03/07/2011 - 19:57 | 1027913 Hannibal
Hannibal's picture

Yep, I will cheer a total Wall Street crash and collapse. Boy times have really changes or have I?

Mon, 03/07/2011 - 19:56 | 1027914 Hannibal
Hannibal's picture

Yep, I will cheer a total Wall Street crash and collapse. Boy times have really changes or have I?

Mon, 03/07/2011 - 20:06 | 1027932 Pseudo Anonym
Pseudo Anonym's picture

Unfortunately for the Fed, consumer deleveraging is alive and healthy

fortunately for the shtadlan reb shalom bernookystein, the college kids are willing to take on (student) debt in hopes they also, one day, can take it up the ass from the hofjuden

Mon, 03/07/2011 - 20:06 | 1027934 spank-of-america
spank-of-america's picture

And we're goin' to Serf City, 'cause it's two to one
You know we're goin' to Serf City, better bring a gun
Ya, we're goin' to Serf City, 'cause it's two to one
You know we're goin' to Serf City, cause the bankers won, now
Two guys for every job

Mon, 03/07/2011 - 20:10 | 1027945 docj
docj's picture

Well, did my part for March.  Closed-out a HELOC 6-years early because I didn't need it.  The banker-lady looked at me like I was nuts.

Winning!

Mon, 03/07/2011 - 20:26 | 1027979 lsjcma
lsjcma's picture

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Mon, 03/07/2011 - 20:53 | 1028122 PeterSchump
PeterSchump's picture

How can this report possibly be bad?  Don't we want to get the evil private sector capitalists out of the money business to begin with?  This is nothing but great news for the proletariat.  Viva la revolucion!

 

Seriously, the drop in revolving credit is actually a good sign.  The rest is total crap and an (pen?)ultimate harbinger of doom, fortelling the fiat ponzi imploding.

Mon, 03/07/2011 - 20:49 | 1028123 trav7777
trav7777's picture

if you won't borrow, the government will do it on your behalf

Mon, 03/07/2011 - 20:58 | 1028142 Bobbyrib
Bobbyrib's picture

There's still a chance...the Bush tax cuts and trickle down economics.

Mon, 03/07/2011 - 21:14 | 1028179 luk427
luk427's picture

I think the trickle has turned into the Chinese water torture drop.

Mon, 03/07/2011 - 23:21 | 1028446 lizzy36
lizzy36's picture

I think most still waiting for the Reagan tax cuts to trickle down.

Mon, 03/07/2011 - 21:43 | 1028245 Ned Zeppelin
Ned Zeppelin's picture

All of these accumulating excuses for QE 3. This consumer credit report was a bust for the expansionists. 

Mon, 03/07/2011 - 22:45 | 1028372 PulauHantu29
PulauHantu29's picture

Most people I know are considered "Middle Class" and this past holiday they spent much much less. I was surprised the retial numbers boasting how "great sales were." I didn't see that.

Good article!

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