Consumer Credit Soars As Uncle Sam Resumes Handing Out Billions In Student Loans With Reckless Abandon

Tyler Durden's picture




 

Following a major miss in July consumer credit which declined by $3.3 billion (since revised to a -$2.5 billion decline), it was only natural that August would be the opposite, and see a rebound over consensus. Sure enough, the August total consumer credit number came in at $2.73 trillion, an increase of $18.1 billion from last month, on expectations of an increase by $7.25 billion. Why did the number rise? Same reason as always: a government-funded pump into non-revolving (i.e., Student and Government motor loan) credit which soared by $14 billion while revolving credit posted a modest $4.2 billion increase unable to even offset the July decline. But in headline scanning algo news, this was the highest jump in post-revision (recall last month the Fed completely redid its consumer credit series data which is now useless for any analysis going back before December 2010). Yet oddly even with this massive pump the stock market has refused to rebound and instead is acting in a very odd fashion and the now traditional green color of stock moves has taken on an odd reddish hue that is unfamiliar to the current generation of traders.

From a funding standpoint, it appears that Uncle Sam has had enough, and after taking a breather in July with a tiny $1 billion injection into Student Loan, injected a whopping $24 billion of the total $40 billion in new NSA credit in August: this is highlighted on the chart below showing total credit by source. Needless to say, the biggest source of consumer credit in the past 4 years has been the Federal Government.

Finally, those curious why the government will do everything in its power to pump any and every possible dollar into the economy under the guise of student subsidies, here it is again: at last check there were $914 billion in Federally-Funded student loans and rising at a rate of $20 billion per month.

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Fri, 10/05/2012 - 15:49 | 2860811 debtor of last ...
debtor of last resort's picture

Pump & dump. It's the new normal to saddle up youngsters with a 300k loan to serve the country. We want YOU !!

Fri, 10/05/2012 - 15:53 | 2860839 whatsinaname
whatsinaname's picture

how's that kid doing who was shorting the Euro ?

Fri, 10/05/2012 - 16:19 | 2860939 Thomas
Thomas's picture

What is most troubling to me is the straightedge: you can put a ruler to that plot and it is linear. This seems to defy explanation. A similar straight edge shows up in, of all things, US oil rig counts starting in March of 2009. That date might seem familiar...

http://blogs.wsj.com/economics/2012/08/27/vital-signs-chart-slowing-u-s-...

 

Why would rig counts rise linearly?

Fri, 10/05/2012 - 16:32 | 2860981 THX 1178
THX 1178's picture

I just don't see this as a bad thing... the USA/FED is maxing its credit card out before we hyperinflate to pay it off. Think of this as an upgrade of our population.

Fri, 10/05/2012 - 16:38 | 2861005 debtor of last ...
debtor of last resort's picture

By removing the honey and adding sugar, obesitas is your future.

Fri, 10/05/2012 - 16:41 | 2861015 MillionDollarBogus_
MillionDollarBogus_'s picture

Agreed...

Based on that graph, Americans are rapidly becoming the best educated group on the planet, right...??

The pay-off on all this new education will be huge...

Fri, 10/05/2012 - 16:48 | 2861042 Thomas
Thomas's picture

Student debt will choke a generation. If they get smart, they will quit majoring in dogshit and start studying stuff that offers life skills. I read that anthropology lecturers get $10K per semester to teach. Ouch. What is even worse is that they are training more people to be anthropology lecturers. Ouch. Make sure your kids, when they go off to college, realize that this isn't just about growing up (although that is a component.) A relatively few disciplines prepare you, via a direct path, for a career. The sheepskin alone won't do it going forward.

I have read undergraduate admissions for maybe six years. I have run our department's graduate admissions for 7 years. I am giving you advice from the inside. I see smart kids--Ivy League smart--potentially squandering $200K and a once-only opportunity. And should your kid major in some dogshit subject, they will be tempted to go to law school--the last refuge of those with useless majors. That's a bad idea too. The glut is surreal.

Fri, 10/05/2012 - 17:10 | 2861107 newworldorder
newworldorder's picture

Yes - but if you can get one of the coveted jobs through "connections" you can make a lot of money as a lawyer. All the rest can dream, cant they?

Fri, 10/05/2012 - 17:02 | 2861077 falak pema
falak pema's picture

you mean they are going to evolve beyond Davy crockett and James bowie?

The new frontiersman spirit is going to evolve to something more "educated", beyond NRA meme?

What will the Tea party do?!!

they will become homeless in the land of the free, home of the brave!....

Are you sure MDB you be a true American frontiersman?

Fri, 10/05/2012 - 17:02 | 2861078 THX 1178
THX 1178's picture

Well, intelligence and job training have little to do with one another. Americans are not getting smart, obviously, but they are getting the kind of training that will allow them to sit in cublicles 12 hours a day piling numbers into spreadsheets. The payoff doesn't matter, because the cost once we hyperinflate will be zero. Thats the whole scam-- run the system to the hilt, blow as many bubbles as possible and increase debt as much as possible before we hyperinflate and pay it all off with EASE. But I understand you're a troll and you're cynical w/e... this is the endgame. FUCK OUR CREDITORS. BOOM!

Fri, 10/05/2012 - 17:10 | 2861105 debtor of last ...
debtor of last resort's picture

I'm not an ordinairy troll, i'm your worst nightmare. And indeed, the freak show is about to end.

Fri, 10/05/2012 - 17:02 | 2861081 debtor of last ...
debtor of last resort's picture

It's important one knows how to grow an egg.

Fri, 10/05/2012 - 20:58 | 2861804 Bernankenstein
Bernankenstein's picture

Better one knows how to lay an egg, or at least have some chickens, or know when the egg will be laid...of course the chicken has to be laid first before the laying can begin. I remember Wall Street laid an egg. I think I need to lay down. A message from the Fed: "Got laid?"

Fri, 10/05/2012 - 16:35 | 2860996 Oh regional Indian
Oh regional Indian's picture

Straight lines = manipulation. Unnatural.

As for the student loan story (I paid through my teeth for being sloppy), the dragnet widens, plan and simple.

15 years ago, in India, you could not get a loan unless you were connected to the bank folks somehow. Or politically.

Now a monkey can show three slips of being salayman, even if job is newspaper delivery, and get a loan 5X his annual income.

At 16-18% if not a little bit more.

Crazy, which long supressed sociaty will be able to resist... gold into the glold loaners, life increasingly beholden to debt.

ori

Fri, 10/05/2012 - 16:22 | 2860949 debtor of last ...
debtor of last resort's picture

Maybe it will become the new Dimon. And fucking Asian youngsters in the NEAR future with the same crap.

Sat, 10/06/2012 - 09:49 | 2862520 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Larry, this is what happens when you fuck a stranger in the ass.

Fri, 10/05/2012 - 16:07 | 2860902 HedgeAccordingly
HedgeAccordingly's picture

IT is friday.. time for Clooney scraps - babe -

Fri, 10/05/2012 - 15:49 | 2860813 no taste
no taste's picture

I'm sure there are some people who will benefit from Romney and from Obama. What I don't know is whether they have Romney / Obama stickers on the back of their private jets.

 

http://howstupidare.blogspot.com/

Fri, 10/05/2012 - 16:52 | 2861062 Poetic injustice
Poetic injustice's picture

In other countries smart state employees keep picture of leader on their wall, with runner-up on other side. So if other guy wins, they just flip picture.

Fri, 10/05/2012 - 15:53 | 2860814 francis_sawyer
francis_sawyer's picture

Go STATE!... Beat TECH!... (while you're at it... GO WILD! & Show us your tits!... especially if you're just one who wants to get your degree in your pajamas)...

Fri, 10/05/2012 - 15:49 | 2860818 RiverRoad
RiverRoad's picture

You can never have enough debt serfs especially when the next big war comes and people stop volunteering.

Fri, 10/05/2012 - 15:51 | 2860830 edifice
edifice's picture

Well, they have to put the debt "money" somewhere...

Fri, 10/05/2012 - 15:51 | 2860833 The big unzip
The big unzip's picture

QE4 now has something else to buy.

Sat, 10/06/2012 - 09:51 | 2862522 MiltonFriedmans...
MiltonFriedmansNightmare's picture

There is never a shortage of things to buy.  Don't be surprised is AAPL isn't the object of desire when QE5 rolls around.

Sat, 10/06/2012 - 09:53 | 2862527 MiltonFriedmans...
MiltonFriedmansNightmare's picture

But, yeah, I think student loans are a good bet for QE4, assuming martial law hasn't been declared first, which is a big assumption.

Fri, 10/05/2012 - 15:52 | 2860836 Lost Wages
Lost Wages's picture

Use your student loans to buy gold & weed, then skip all your classes. It's the only way to get ahead, kiddies.

Fri, 10/05/2012 - 15:58 | 2860862 malikai
malikai's picture

Those student loans are enough money to get a good little dealing op set up on campus. The profit could have the loans paid off before you finish school.

Fri, 10/05/2012 - 16:10 | 2860909 Miss Expectations
Miss Expectations's picture

I had a friend in college, who in the Spring just kind of disappeared for a few days.  When I saw him again I was like, "where you been the last 3 days?"  He was planting some weed far off campus and was planning on a bountiful harvest... JIT for his return to school in the Fall.

Fri, 10/05/2012 - 16:02 | 2860885 Shizzmoney
Shizzmoney's picture

Maybe if those kids were able to sell weed legally, maybe then we could finally get some serious job creation in this country.

Fri, 10/05/2012 - 16:31 | 2860977 cynicalskeptic
cynicalskeptic's picture

And between the savings on all the people NOT in prison for drugs and the massive savings from money saved in fighting the 'War on Drugs' - along with the taxes that would be imposed - you'd also put a nice dent in the deficit.

Fri, 10/05/2012 - 16:50 | 2861051 pods
pods's picture

But our prison industrial complex would suffer.

And that is big money, so (most) drugs will remain illegal.

pods

Fri, 10/05/2012 - 16:35 | 2860992 MisterMousePotato
MisterMousePotato's picture

If those kids were able to sell weed legally, it wouldn't be worth anything. Why do you think it's illegal? (To protect certain individuals' profits.)

Fri, 10/05/2012 - 15:56 | 2860844 ATG
ATG's picture

Money makes the market go, even credit for a time.

Maybe that's why we just Sold to Close Long our QQQ puts and Bought to Open Long QQQ calls near the highs and lows of the day respectively:

http://richcash8tradeblog.blogspot.com/

Fri, 10/05/2012 - 15:54 | 2860848 azzhatter
azzhatter's picture

Ben "Bubbles" Bernanke has an orgasm. LIESman catches

Fri, 10/05/2012 - 15:56 | 2860854 urbanelf
urbanelf's picture

Let the wild rumpus begin!!!

Fri, 10/05/2012 - 15:56 | 2860856 JailBank
JailBank's picture

Just in time for iPhone5

Fri, 10/05/2012 - 15:57 | 2860857 PUD
PUD's picture

yes we can! the resilient consumer! Bankers everywhere jizz in their pants.

Fri, 10/05/2012 - 15:58 | 2860861 CommunityStandard
CommunityStandard's picture

but... but... I thought students all had jobs now?

Fri, 10/05/2012 - 15:59 | 2860868 lolmao500
lolmao500's picture

In other news...

http://www.chicagotribune.com/news/sns-rt-us-armenia-presidentbre89417o-...

Armenian president says Azerbaijan threatens new war

Armenian President Serzh Sarksyan accused Azerbaijan on Friday of threatening a new war over the territory of Nagorno-Karabakh disputed by the south Caucasus neighbors.

Azerbaijan is accumulating a "horrendous quantity" of arms in preparation for a resumption of fighting, Sarksyan, 58, told Reuters in an interview. He said Armenia wanted a negotiated settlement to the conflict and that he would spare no effort to achieve it.

Fri, 10/05/2012 - 16:00 | 2860869 Catullus
Catullus's picture

Seriously. College students: buy silver and gold instead of your textbooks and just steal what you need off the Internet. You don't have to pay the loans back until 6 months after graduation. It doesn't get any more obvious than this. It's just a massive transfer of wealth to you.

Fri, 10/05/2012 - 16:13 | 2860917 Diogenes
Diogenes's picture

How about this. Live it up as a student and graduate with $100,000 of (non forgivable) student loan debt. In the meantime start applying for credit cards. Use each one once and pay it off immediately. You need at least $100,000 worth (20 cards @ $5000 limit).

When you graduate get cash advances on your cards and pay off your student loans. If you have any credit left, max it out.

Now go bankrupt. All the supposedly non dischargeable debt goes poof and disappears.

Fri, 10/05/2012 - 16:31 | 2860975 Catullus
Catullus's picture

Yeah... The only problem I see with that is even if and when the SHTF, gold and silver will probably become the collateralizing instrument. Which means a system of credit will still be there. No reason to impair your ability to lever up later by defaulting.

Then if you mistime the SHTF event, you're making a big bet. It's still consumer credit economy. Tough to press the hard ways.

Fri, 10/05/2012 - 16:44 | 2861034 TheFulishBastid
TheFulishBastid's picture

@D

 

Dunno if that was facetious or not, but I raise my glass to you.

Fri, 10/05/2012 - 16:02 | 2860875 Cognitive Dissonance
Cognitive Dissonance's picture

First there was the Obama Phone, then the Obama Loan. Too funny.

<Or is it the other way around?>

Fri, 10/05/2012 - 16:06 | 2860899 Dr. Engali
Dr. Engali's picture

You forgot the Obama home....all squatters welcome.

Fri, 10/05/2012 - 16:11 | 2860912 Cognitive Dissonance
Cognitive Dissonance's picture

Obama history certainly does rhyme. :>)

Fri, 10/05/2012 - 16:01 | 2860876 Element
Element's picture

Angry idealistic students do tend to rally and protest and generally make a corrupt Govt and klepto-establishment system to look kinda bad and delegitimised.

Fri, 10/05/2012 - 16:01 | 2860882 r101958
r101958's picture

How about we find out how many 18-24 yr olds are now not 'unemployed' because the government is handing out all these student loans. 100k? 200k? more? If not for government largesse these students would be unemployed, no? In my opinion, this is another government ploy (using our grandkids' money) to reduce headline unemployment. Of course, this house of cards is bound to come crashing down too.

Fri, 10/05/2012 - 16:05 | 2860894 SafelyGraze
SafelyGraze's picture

if velocity of money is gdp/moneyStock, then maybe the velocity of silver is captured by trades/silverStock

brotherjohnf estimates this to be 109/2*106 =  500

beats the hell out of the velocity of M2

clearly people are trying to get rid of their damn silver. it's like a hot potato. nobody wants it.

Fri, 10/05/2012 - 18:27 | 2861314 SafelyGraze
SafelyGraze's picture

spoiler:

.. and therefore, by implication, devalued by a factor of more than 100x compared to bankmedium (which has a velocity of only 1.5)

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