98% Of All Consumer Credit In Past Year Was Student And Car Loans

Tyler Durden's picture

Same shit, different month. If last month total consumer credit increased by $13.8 billion, of which $14.0 billion went into student and car loans meaning consumers continued deleveraging on their credit card statements (some expectation for a recovery there), then February was even worse. The headline number was great: $16.5 billion, well above the $14.0 billion expected. The problem is that of this number well more than 100%, or $18.9 billion was once again slated for car purchases and paying down "student bills" (not really - as has been reported numerous times before Americans increasingly use student loans as a means to pay for everything else but tuition).

In other words, anyone suggesting that the "surge" in household lending is in any way remotely indicative of consumer hope in a recovery is i) an idiot or ii) clueless and won't even be bothered to read the fine print which once again suggests that the only credit Americans will take on is whatever comes implicitly free, and is certainly not meant to be repaid, courtesy of Uncle Sam. Unlike credit cards.


And putting this in context, in the past 12 months, a record 98% of all credit - $162 billion - has gone into non-revolving debt, i.e., student and car loans. How much has been added to credit card balances? An absolutely meaningless $4 billion, or 2% of total. Shown below, the "consumer recovery" is the bar chart on the left.

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FieldingMellish's picture

What do student loans and car loans have in common?

Starbuck's Drive Thru.

NoDebt's picture

Would you like fries with that debt?

jbvtme's picture

brain washing on credit

Handful of Dust's picture

det = grote

It's basic Princeton Econ, 101.

Caviar Emptor's picture

Here's the deal:
Pre-Crisis: Consumers load up on debt for real estate and consumables for their home and electronic lifestyle
Post-Crisis: consumers load up on debt to fund education so they can qualify for work, and for autos so they can get to work.
See the trend yet??
Next phase of the "Recovery": Consumers go into debt for food, water and air.

It all points to the same fact: consumer buying power is circling the drain due to biflation.

centerline's picture

I really hate the "biflation" term - but, you know what?  It fits better than anything else right now because it doesn't lead one into classical definitions that just don't fit so well.

Dick Buttkiss's picture

Been using the term for some time now and expect the full force of it — collapsing asset prices, skyrocketing consumer prices relative to wages (for those who have jobs) — sometime this year, next year at the latest.

MachoMan's picture

No need to reinvent the wheel.  It's called cost push inflation...  In this case, trying to push a 400lb woman over a 12 foot wall on a "team building" ropes course.  She'll get over the wall eventually, it will just take a sprained back, few beers, and a call to a crane operator.

Traditional inflation (and everything we think of inflation) merely describes demand pull...  totally different beast.  Cost push inflation is reserved for those special instances when a currency dies (although not necessarily the only avenue).

Dick Buttkiss's picture

Not to quibble, but in a "typical" currency collapse (e.g., Zimbabwe), asset prices rise with consumer prices (cost-push), whereas what we're heading toward with a dollar collapse — i.e., a collapse of the world's reserve currency — is a collapse in (paper) asset prices, while the cost of real goods (e.g., food and fuel) outpaces wages (as has long been the case).

The paper collapse awaits, in other words, and in case you're not prepared for it:



daveO's picture

Dollar collapse, same thing. What would a Mexican, in the 2nd half of the 1980's call it? That might sound more stylish.

seek's picture

I'm going to hestitatingly throw some love Starbuck's way. They employ my daughter (who is a diligent worker) and have thrown enough hours at her that's between earnings and grant, she's getting through college debt-free, and they just supplied her with a health policy that matches mine for $25/mo.

It's a sucky place to be if you're a college grad with student loans, but it's actually a pretty good option if you're working on being a college grad without loans. I'm grudgingly impressed by how they handle people with a work ethic.

centerline's picture

I have middle-aged family that quit working, took out an Obama loan for college and are living off it.

Interesting times, eh?

tiwimon's picture

And... when they the parade (or is it charade?) stops and those student loans come due - there is no getting away from it - student loan debt cannot be run through bankruptcy, and they can and will take future earnings (if any) - these are non dischargeable loans that must be paid. Using student loans to live on as a form of paycheck is just borrowed time - most will never ght a job equivilent in pay to pay off said loans.

centerline's picture

Yup.  Is going to end well.  lol.

Rock meets hard place - for everyone!

seek's picture

While I agree, I'm willing to bet they'll buy votes with debt forgiveness within the next 10 years, probably within the next five. It'll just be a thinly veiled bank bailout.

centerline's picture

The masses will cheer the "strong man" as he promises to wash away thier debts for allegiance to the "cause."

The whole Star Wars thunderous applause thing and all.

History repeating itself over and over.

daveO's picture

At the rate of debt expansion, I'd be surprised if they ever have to pay off those debts in dollars.

Offthebeach's picture

They're Fedgov backed. ( you, me, anyone in the world with fedgovReserveCo paper). Just continue to the PhD in Transgender Sustainable Theatre Lighting. Then get a union municipal job that reimburses.

Actually since we owe the money to ourselves, or our never to be had grandchildren, we should all go to Podunk U.


stu11's picture

keep up tiwi......  "Student Loan Bailout"

seek's picture

Have an ex-GF that did the same thing, I think she's just shy of six figures on loans, maybe 20% went to school and the rest was living expenses over 4 years. Insane. I think she's paying it back at the rate of $100/mo now.

Thing that really pisses me off is savers like myself and hard workers like daughter will get nothing for being responsible, and these people will get away with it. You just know there's going to be a student loan debt forgiveness bill somepoint in the future where the Fed just prints and hands the cash over to the loan banks to make them whole.

I totally get why people say "fuck it" and sign up for every gov't program offered.

centerline's picture

Yeah, I have 2 kids that are approaching college soon enough.  This world is shaping up to put a disproportionate weight on thier shoulders in about every way possible.  Not cool at all.  Moral hazard just creeps higher and higher every passing day.

seek's picture

"Moral hazard just creeps higher and higher every passing day."

Ultimately this will cause a Atlas Shrugged-type strike in real life, probably along the lines of the old USSR joke: "they pretend to pay us, and we pretend to work."

It really does appear it will get to the point soon where the young (and increasingly older) will have no incentive to work whatsoever, and if they have a work ethic, it will be held against them.

Dewey Cheatum Howe's picture

It really does appear it will get to the point soon where the young (and increasingly older) will have no incentive to work whatsoever, and if they have a work ethic, it will be held against them.

Kind of a like a union job now.

TheGardener's picture

Looser economy has had run her way.

You do not borrow any money for private purposes, no matter what. As an entrepreneur, all you would ever go into debt for is merchandise while having multiples of capital sloshing around your side for your suppliers benefit.

Debt is for losers. Starbucks consumers among thinking folks? What a scam, I feed myself and the dog for a week on that tap for a nap...

Agent P's picture

seek, thanks for the insight and I'm truly happy for you and your daughter.  That being said, I still ain't paying no $5 for no damn coffee. 

Bunga Bunga's picture

What do student loans and car loans have in common?

The collateral disappears quickly.

SAT 800's picture

Gonna be a lot of "students" riding bicycles. IMHO.

max2205's picture

That's good right? 

robilla's picture

Is mortgage debt not considered in this calc?

I don't know the data series that well

quintago's picture

They rack up CC debt, people bitch. They don't, people bitch. Can the consumer get an effing break here. Jesus

cynicalskeptic's picture

The consumer is getting screwed with a big old splintery telephone pole... banks get money for 0% - or damn close to that and charge consumers 21% on credit card debt - WITH fees and penalties added as icing to the cake?!?!?  (How do you NOT make a nice big profit with those busioness fundamentals (eve anllowing for defaults)?

Why would any sane person bother racking up more debt if they don't HAVE to?... and if you really NEED access to credit you can be damn sure they're not allowing you any.

MachoMan's picture

I think there's a decent argument to make for the folks who've managed to rack up an incredible amount of debt...  especially the ones who have been so successful at it that the banks wouldn't dare foreclose...  I have doubts that these folks don't have it figured out.  If you have no future prospects, then why not rack up the debt (having a great time) and file for bk?  Of course, while pursuing this consumptive lifestyle, everyone forgot to actually have fun, but I digress. 

In the case of students, it's college (4+ years of vacation) -> mom and dad's basement (maybe a part time job/remainder of life on partial vacation) -> inherit a house (probably mortgaged to the gills, but probably unforecloseable)...  The american dream.

Stoploss's picture

Ha Ha funny, funny. There is no chart on the left.

That's my neighbors two new camper busses..

101 years and counting's picture

who needs credit when you have the great amerikkan ponzi known as stocks?  buy low, sell high.  use fed-funded gains to buy things with cash. duh.  everyone is doing it.  no risk, all reward.

NEOSERF's picture

Starbux is exactly the intersection of these two loans.  After you come out with your anthropology degree and $120K in debt, you buy a car to get to your new job at Starbux.  Just a matter of time before Starbux bail on healthcare now that Chuck's mission is done to provide healthcare to all his employees.  Then see how long it takes to get a triple expresso shot, caramel macchiato with the new crop of employees.

NEOSERF's picture

Expect Winnebago sales to go through the roof in the coming years as boomers have no alternative and no desire to pay taxes anymore.  Sell the home, take your $50k equity and get on the road plugging into the new Tesla rechargers and hiding from the taxman...

KidHorn's picture

You might be right. I guess all you need is a PO Box for your SS checks. Can you direct deposit SS checks?

SmallerGovNow2's picture

I can retire in two years and working to sell the house right now, buy a piece of property in the county, and a fifth wheel to park there with power, water, and septic hookups for when my wife and i aren't traveling...

thamnosma's picture

There is something tempting about it.  I've seen them parked at state campgrounds right at the Pacific in Cali.  The houses above them cost millions.   60-70 degrees all year.   Get tired of that?   Drive on...

Professor Fate's picture

Absolutely NEO.  If I was younger, it would be a sailboat.  But now its an old farts "Goin' Galtmobile".  Can't wait to pull the plug.  Got a couple of small businesses to sell and then....GOO-BYE!

Fate the Magnificent
"Push the Button, Max"

Smegley Wanxalot's picture

Student loans all go to drugs.  So the drug cartels are bullish at this news.

fzrkid's picture

"clueless and won't even be bothered to read the fine print which once again suggests that the only credit Americans will take on is whatever comes implicitly free, and is certainly not meant to be repaid, courtesy of Uncle Sam. Unlike credit cards


Student debt offers no way out as it is a collatralized loan 'on your lifetime earnings'


Where as a credit card is a nonsecured loan. Just dont pay it.. 20 years ago I let 30k of CC debt go. Havnt taken on any debt since.


Though I am tempted to load up on CC, max them out and move to Singapore...

BooMushroom's picture

You forgot the phrase "under current law." Debts that cannot be paid back, won't be.

Gaius Frakkin' Baltar's picture

more debt = green stocks