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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...


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 - 17:11 | 2861110 negative rates
negative rates's picture

Pump up the jam, pump it up.

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


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.


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.

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.


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:

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...

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



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


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

Fri, 10/05/2012 - 16:23 | 2860947 Fecklesslackey
Fecklesslackey's picture

I'm ready with my Black Woman Studies degree so I can get one of them great USDA jobs, so I can apply what I learnt to teach others how those condoms  can protect them from havin babies



Fri, 10/05/2012 - 23:49 | 2862131 Sheriff Douchen...
Sheriff Douchenik from AZ's picture

Well I guess China is short on Black Woman Study majors, so maybe they can find a use for them... maybe grind them up for dog food?

Fri, 10/05/2012 - 16:26 | 2860959 Lord Drek
Lord Drek's picture

I know a girl whose very existence is dependent upon her FAFSA/Pell Grant checks. When are the sheep going to wake up?

Fri, 10/05/2012 - 17:01 | 2861075 blueRidgeBoy
blueRidgeBoy's picture

moments before the slaughter

Fri, 10/05/2012 - 18:02 | 2861243 Thecomingcollapse
Thecomingcollapse's picture

I know 3 people that have gone "back to school" and got loans just to have a paycheck!  It's becoming the new normal when the unemployment checks stops coming.... you just go get a big student loan!

One lady is 70 damn years old and got a student loan to do improvements on her house!

Fri, 10/05/2012 - 23:39 | 2862124 10mm
10mm's picture

Your never to old to get an education.Shes smart the old geezer,shes dead anyway.

Sat, 10/06/2012 - 13:54 | 2862978 MilleniumJane
MilleniumJane's picture

C'mon, not all of these kids are useless.  Some of these kids are really trying to improve their lives and have a calling.

For example, my cousin.  The first on my dad's side to graduate college.  He is studying to become an opthamologist.  Majored in biochemistry but found he didn't like doing research.  He feels he would be of better service helping people directly as a doctor.  By the time he completes his schooling and enters residency, he estimates he will be $150,000 in the hole.  He's a smart and awake kid and he has researched every way to get scholarships and grants to help with the cost, but there isn't a whole lot out there that he is eligible for.  He admitted he is freaked out getting these student loans and has had sleepless nights with this hanging over his head.

It is disgusting how the system burdens our young people with debt servitude before they have even really started their professional lives.

Fri, 10/05/2012 - 16:29 | 2860970 Kreditanstalt
Kreditanstalt's picture


Banks.  Non-banks.  Carmakers.  The unemployed.  The military.  All government jobs.  Food stamp users.  Mortgage-holders.  Car buyers.  State governments.  Municipal governments.  Users of Revolving Credit.  Students.  Union members.


Fri, 10/05/2012 - 16:42 | 2861018 yogibear
yogibear's picture

They have the young adults in debt with super-sized college loans and the babies born into trillions of debt. 

Nice job Bernanke, Evans, Dudley and Yellen. You have nearly everyone drowning in debt.

Go long boiled rope, gasoline, guns and amo.

Fri, 10/05/2012 - 16:46 | 2861040 cynicalskeptic
cynicalskeptic's picture

WITHOUT massive federal student loan support COLLEGE TUITION WOULD BE LOWER

The bogus 'for profit' colleges that are simply scams to suck up loan money would be out of business - and rightfully so  - while legit colleges would have to  compete to fill slots.   If people can't afford college they won't go.  SO colleges reduce costs and tuition - cutting some of the more egregious costs (like college heads pulling in a million a year).

I'm all in favor of education for education's sake but there are limits.  right now it's too damn easy to get loans for a degre that has NO prospects for employmnet, NO demand in the marketplace (outside adjunct professorships teaching more of the same)..   The very best in any field will find employment but there are too many mediocre graduates holdong worthless degrees - and thousands in debt.  Sometimes you need to protect people from their own stupidity.   

Sidebar - European relatives take exams and compete for slots in colleges and get a free/minimal cost education.  They may not get the school they want depending on their performance and some majors are not easy to obtain.  If they change majors it's up to them to foot the increased cost in the additional classes needed.  They complain but compared to the US system it's great.   But then they also have viable tech training for those NOT going to college as well.


Sadly when government tries to help it often worsens the problem - like rent control and subsidies.....In NYC you have large cheap apartmetns occupied by old people while families are crowded into small ones.  But the old people have no reason to move - indeed they have every reason nOT to.  Section 8 drivew rents UP - some landlords preferring a guaranteed government check for lousy tennants over hard working tennants who have to come up with rent out of their eanings.   The government subsidies drive up the rents landlords ask for and end up screwing those who are worlking hard and paying their own rent.

Fri, 10/05/2012 - 16:49 | 2861046 drexlraw
drexlraw's picture

buy the fucking dump,right?

Sat, 10/06/2012 - 11:42 | 2862757 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Rodney Dangerfieldism?

Fri, 10/05/2012 - 16:52 | 2861049 worbsid
worbsid's picture

Here's what happens to protesting students.

If you can watch the whole thing without getting mad, your good for banking president.

Fri, 10/05/2012 - 16:51 | 2861058 TheFulishBastid
TheFulishBastid's picture

Not to blow holes in this theory, but didn't school just start back?  When else would they spend the most money on fafsa loans?


The answer is, the end of December.  When once again more loans go out...for another semester of school.

C'MON, isn't this kind of a straw man argument?

Fri, 10/05/2012 - 16:55 | 2861064 worbsid
worbsid's picture

Yes, but an iPhone 5 is required for college.

Fri, 10/05/2012 - 16:59 | 2861072 blueRidgeBoy
blueRidgeBoy's picture

obviously you haven't been to a college campus lately - it's iPhones and iPads and MacBooks

Fri, 10/05/2012 - 17:03 | 2861085 akak
akak's picture

and iSheep

Fri, 10/05/2012 - 17:03 | 2861084 flyonmywall
flyonmywall's picture

Sadly, the reason that student loans are going up is not because people are actually trying to get an education. They are using student loan money to pay for living expenses and the latest and greatest iPhone/iPad.

I've seen this at several institutions I've taught at, and have several friends spread about the country at educational institutions. This is what happens.

"Student" applies for financial aid, registers for a full load of classes, gets Pell Grant and student loans. Then the "student" drops all classes within a specified period of time, gets refund for cost of classes and uses the money to pay rent, etc. Or just stays registered for one class, and drops the rest of the classes (or just flunks them).

Rinse, repeat second semester. Sadly, you can only do this for one year before they realize your GPA is in the toilet, but some can do it for two years.

It's the latest "scam" of the desperate generation X and Y, that have NO job prospects, no future, and nowhere to turn to. The government and most importantly, colleges, turn a blind eye to it, because they need the revenue. The lag time for catching the students for defaulting, given the grace period for hardship, is at least 12 months.

So, your graph is now even worse. This will end badly. Incredibly badly.


Fri, 10/05/2012 - 17:44 | 2861202 blunderdog
blunderdog's picture

The kids are all right.  Really, they deserve credit as an amateur corps of deflation-fighters, one loan at a time.

Call it "Bernanke's Army."

Fri, 10/05/2012 - 21:06 | 2861823 A Middle Child ...
A Middle Child of History's picture

It is not so much a scam as it is a way to flip the middle finger at a system that is systematically sucking the wealth from future generations to maintain a dysfunctional status quo. I, and many of my peers, see a future with dismal prospects because of outsourcing trends, labor trends towards the use of temp labor which pay young workers a fraction of what Boomer workers receive with nonexistent benefits, manipulated and rising costs for everything, a generational Ponzi scheme that we pay into but have no chance in hell of receiving, and we know we are being screwed in varied and imaginative ways by a government that makes the Kama Sutra look like a beginner's guide.

Where does the money for student loans come from? Our future is being destroyed through inflation and hyperinflation to provide all this largesse. If you cannot beat them, then screw them at their own game by crashing the corrupt system. That money will never be repaid, or at least will be repaid with inflated future dollars at a fraction of the present value.

I feel we are rapidly approaching a crisis that will make all of this irrelevent. Borrow now in order to prepare because in less than a year the true crash will be upon us, and the government will have to eat their losses. A bad future for everyone but for young adults with few prospects it was dismal to begin with.

Fri, 10/05/2012 - 22:31 | 2862012 blunderdog
blunderdog's picture

    I feel we are rapidly approaching a crisis that will make all of this irrelevent.

Succinct and clear. 

*Everyone* can see that trying to live your parents' youth is the best path to being eaten by your betters.

That's what I find so tiresome about the "whatever happened to ...?" whining you hear on this board every day.

Fri, 10/05/2012 - 17:05 | 2861093 Fix It Again Timmy
Fix It Again Timmy's picture

Talk to a real felon, call your congressman...

Fri, 10/05/2012 - 19:38 | 2861544 q99x2
q99x2's picture

It is ok. The colleges are training grounds for the revolution. So far I've learned how to write contracts, I've learned how globalism destroyed the United States and Europe and I've learned how to use a bull horn when giving a speech. And as a bonus learned what lawyers to contact whenever I get hit with pepper spray or rubber bullets.

Fri, 10/05/2012 - 20:51 | 2861781 medicalstudent
medicalstudent's picture

student loans are the way out. this is the money changers secret in plain sight.


when they default, the government will not have its collateral impaired so as to not make additional loans (why it was so important for sam to take it over) and the currency will remain in circulation to pay down other debt. 


defaults are not deflationary, unless they impair collateral.


defaulting is actually inflationary in a vacuum as the currency has already been lent and spent and fractionally reserved into more loans.


welcome to negative interest rates.

Sat, 10/06/2012 - 13:33 | 2862942 blunderdog
blunderdog's picture

Wish I could up-arrow this again, I'm thinking it deserves more recognition.  Aw, well.

Fri, 10/05/2012 - 21:01 | 2861813 Fix It Again Timmy
Fix It Again Timmy's picture

Step up to the Student Loan Window...



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