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94% Of March Consumer Credit Was For Student And Car Loans

Tyler Durden's picture




 

Another month, another confirmation that when it comes to the US consumer, it is all about student debt (and to a lesser extent, car loans). Moments ago the Fed reported that consumer credit number for March: at $17.5 billion, it not only blew out the expectation of a $15.5 billion increase (although when one adds last month's $3.5 billion downward revision to $13.0 billion the two month total actually missed), but was the highest monthly increase since February 2013. That's the good news.

 

The bad news was once again in the composition: of this $17.5 billion $16.4 billion was non-revolving debt, or about 94% of total. The "good", or revolving, credit card debt? Only $1.1 billion.

Further, recall that traditionally when measuring a consumer's confidence in the economy, and their ability to grow their income, the best proxy is a simple one - their credit card. Unfortunately, in the New Normal that is not the case, and as the chart below shows, revolving credit has barely budged from its post-Lehman lows and is still about 20% away from its previous all time high.

 

As for student debt? We'll just leave that one to the Fed to show:

 

 

So where does the consumer credit growth come from? Simple: mostly student and to a lesser extent car loans, aka non-revolving debt. The same student loans which Janet Yellen earlier today lamented are the main reason for the slowdown in household formation, and by implication, the reason why the housing recovery is failing to stick for the fifth year in a row, and despite $2.7 trillion in liquidity injections by the Fed.

 

Oh well, maybe next month things will be different and all that student debt which is crushing the willingness of young Americans to go out and spend on bulk purchases will be restored.

Finally, and perhaps most important, for all the talk about a surge in consumer bank loans, it bears highlighting that of all the consumer debt so far created in 2014, the Federal Government is by far the primary source at $36.8 billion. As for depository institutions, aka banks: negative $28.2 billion.

Some lending spree all right.

 

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Wed, 05/07/2014 - 15:24 | 4737024 Ham-bone
Ham-bone's picture

fwiw...college just got more expensive

NEW YORK (MarketWatch) -- Interest rates on federal Stafford student loans will rise to 4.66% for undergraduate students next year from 3.86% in the prior year. The interest rate is pegged annually to an auction of 10-year Treasury notes /quotes/zigman/4868283/delayed 10_YEAR -0.54% , which sold at a yield of 2.61% on Wednesday. The interest rate for graduate students will rise to 6.21% next year from 5.41% in the current year. Federal student loans were first pegged to Treasury auctions last year.

Wed, 05/07/2014 - 15:30 | 4737042 max2205
max2205's picture

Fuck it...just charge it!

Wed, 05/07/2014 - 15:31 | 4737050 Rainman
Rainman's picture

Drive that FICO to zero, bitchez !

Wed, 05/07/2014 - 15:34 | 4737059 SilverIsKing
SilverIsKing's picture

The economy is on fire!

Wed, 05/07/2014 - 15:40 | 4737077 pods
pods's picture

I see banks have decided to finally open the spigots and start creating credit money and lending it out?

So we have Credit Unions and Uncle Sugar (mainly Uncle Sugar)?  

We are so utterly fucked it is unbelievable.

America is like poor old Ned Beatty scramblin' up the hill in his tighty whiteys.

pods

Wed, 05/07/2014 - 16:15 | 4737185 ParkAveFlasher
ParkAveFlasher's picture

On that note, time for my daily check on my miners.  Yep, Beatty'd.

Wed, 05/07/2014 - 16:34 | 4737246 SafelyGraze
SafelyGraze's picture

the economic expansion is limited only by the number and price of new cars sold, and by the number and price of classroom seats filled.

on the education side, if only there were some centrally-planned targets to increase the number of classroom seats filled

http://www.whitehouse.gov/sites/default/files/completion_state_by_state.pdf

http://theobamacrat.com/2014/05/02/reach-higher-for-college-the-first-la...

and some sort of monitoring system

http://dashboard.ed.gov/dashboard.aspx

then that would only leave the need for a mechanism to make tuition skyrocket, maybe by building new dorms and student unions and high-tech buildings and recreation centers

http://www.archdaily.com/421042/the-wellness-center-a-new-breed-of-recre...

then the consumer-debt expansion of the economy could really go to the next level

 

Wed, 05/07/2014 - 17:05 | 4737322 ndotken
ndotken's picture

I wonder if the explosion in student loan debt is in any way related to some of Obama's largest campaign contributors being colleges and universities? Nah ... that couldn't be it /sarc

Wed, 05/07/2014 - 16:15 | 4737188 tarsubil
tarsubil's picture

The last credit bubble had houses as collateral. This has depreciating cars and fucking slips of paper with fancy writing on them for collateral. Should end even better this time.

Wed, 05/07/2014 - 15:46 | 4737090 TruthInSunshine
TruthInSunshine's picture

Stuffing the eCONomy with subprime Auto Loans & College" Loan Debt
(a full 1/3 of which is currently in default or otherwise not paying/performing), bitchez! It's the NEW NORMAL IN TIMES OF BROKEN MARKETS THANKS TO INSANE CENTRAL BANK MONETARY POLICY.

NOONE COULD'VE SEEN IT COMING!
WHAT COULD POSSIBLY GO WRONG.

April 10, 2014
Financial Times 

http://www.responsiblelending.org/tools-resources/headlines/american-sub...

AMERICAN SUBPRIME LENDING IS BACK ON THE ROAD

"Although many asset managers said during the financial crisis that they would never touch subprime again, subprime lending has made a return in auto lending. Data show that outstanding car loans rose 25 percent in the past three years, and car loans continue to rise even as outstanding loans on credit cards hover near 10-year lows. Moreover, subprime loans now represent about a third of all new car loans, up from nearly one-tenth five years ago, and one-tenth of new loans are "deep subprime," given to consumers who previously would have had little chance of getting financed.

Observers attribute the return of subprime lending in the auto industry to asset managers DESPERATE TO GENERATE RETURNS IN THE ULTRA-LOW INTEREST RATE ENVIRONMENT ..."

CBS NEWS
May 6, 2014, 7:43 PM

Americans seek relief from student loan debt

http://www.cbsnews.com/news/americans-seek-relief-from-student-loan-debt/

"Student loans have become an economic albatross that has many Americans begging for relief...

In the past 10 years, student debt has tripled in the United States, from $364 billion to more than $1.2 trillion. That's more than Americans owe on credit cards or auto lines...

...Thirty percent of federal student loans are in default, forbearance or deferment." (THAT IS 1 IN 3, FOR THOSE KEEPING SCORE AT HOME).

Wed, 05/07/2014 - 15:49 | 4737107 pods
pods's picture

So there is more debt in default now than there was total debt 10 years ago?

Winning.

pods

Wed, 05/07/2014 - 15:57 | 4737131 TruthInSunshine
TruthInSunshine's picture

Yes.

33% of all auto loans (new or used) are subprime, and coincidentally, approx 1/3 of student loans are not being repaid currently (this % will only rise).

FORWARD!

Wed, 05/07/2014 - 15:59 | 4737134 centerline
centerline's picture

Well, that just means the prices are going to have to adjust for the write-offs!

(to infinity and beyond!)

Wed, 05/07/2014 - 16:12 | 4737145 TruthInSunshine
TruthInSunshine's picture

Oops, my bad - 33% of NEW VEHICLE LOANS ARE NOW SUBPRIME (so probably 50% of used vehicle loans are), up from 10% JUST FIVE YEARS AGO.

"Data show that outstanding car loans rose 25 percent in the past three years, and car loans continue to rise even as outstanding loans on credit cards hover near 10-year lows. Moreover, subprime loans now represent about a third of all new car loans, up from nearly one-tenth five years ago."

And a third of student loans are in default or otherwise not being re-paid.

FORWARD!

Wed, 05/07/2014 - 17:30 | 4737384 Georgia_Boy
Georgia_Boy's picture

I've said on ZH a couple times that I'm amazed by the number of Benzes I see around my city (3rd tier, poor by coastal standards), now I start to see where they're all coming from.

As for me, just finished off my wife's student debt a month or two ago, and that's the last of my debt other than the mortgage.

Wed, 05/07/2014 - 18:36 | 4737564 Pareto
Pareto's picture

Good for you man.  Isn't freedom awesome.........now that you have some of it back?

Wed, 05/07/2014 - 15:31 | 4737047 McMolotov
McMolotov's picture

Future debt slaves will be given the opportunity to sign up to help Uncle Sam fight them damn Ruskies and have their debt (and, quite possibly, lives) erased.

Wed, 05/07/2014 - 15:37 | 4737065 NoDebt
NoDebt's picture

Debt to be transferred to their next of kin.

Wed, 05/07/2014 - 15:47 | 4737100 TruthInSunshine
TruthInSunshine's picture

Everything will work out well.

Americans are tapping their 401ks at an unprecedented rate (and moving back into their parents' basements; really, read the article) to offset the "lack of inflation" that Yellen, Evans, Plosser and the rest of the criminals at the Fed keep talking about.

Early Tap of 401(k) Replaces Homes as American Piggy Bank
By Richard Rubin and Margaret Collins 2014-05-06T17:59:19

"Premature withdrawals from retirement accounts have become America’s new piggy bank, cracked open in record amounts during lean times by people like Cindy Cromie, who needed the money to rent a U-Haul and start a new life.

Her employer, the University of Pittsburgh Medical Center, had outsourced Cromie’s medical transcription work. Cromie said the move cut her income by as much as 60 percent, at times leaving her with minimum-wage pay.

So, last year, at age 56, she moved about 90 miles from her home in Edinboro, Pennsylvania, into her mother’s basement. To make ends meet as she moved and then quit the job, Cromie pulled out $2,767 from her retirement savings...."

http://www.bloomberg.com/news/2014-05-06/early-tap-of-401-k-replaces-hom...

Wed, 05/07/2014 - 15:51 | 4737111 McMolotov
McMolotov's picture

The Fed: Bringing families closer together — one lost job at a time.

Wed, 05/07/2014 - 16:01 | 4737137 pelican
pelican's picture

I just took an additional 5k from my IRA to make ends meet. 

 

When does someone in DC with a set of balls just say it is all fucked up and cannot be repaired.

Wed, 05/07/2014 - 16:17 | 4737197 p00k1e
p00k1e's picture

I just tapped my 401K.  I drained it all.  Like I read in a post on another thread, look at what happened to the GM senior bondholders when the S really HTF.  Same will happen to 401K…  If the Fukushima tumors don’t eat us first.  

In one plan, I'm debating on buying a house for cash and living payment free (except for property taxes) so I don’t have to hold paper…. And can laugh at the then homeless.  

In another plan, I’m debating on buying gold/silver eagles in preparation for the exodus.  

Wed, 05/07/2014 - 16:18 | 4737199 Dr.Vannostrand
Dr.Vannostrand's picture

Took some out last week, to convert to PHYS. Fuck it, I'm 32, not seeing that "money" anytime soon, if at all.

 

Wed, 05/07/2014 - 16:38 | 4737256 shitco.in
shitco.in's picture

Most young people have the exact same sentiments and are doing the same. 

Wed, 05/07/2014 - 16:15 | 4737167 IndyPat
IndyPat's picture

My gawd...pleaz.

Can you really put a price on the value of a PHD in Women's Studies?

War on women marches on.

Seriously, though.Get a PHD in Chemistry, Junior. That's the ticket.
It's like the man said...
Tyler: "Did you know that if you mix 1 part
of gasoline and 8 parts styrofoam packing peanuts, you can make napalm?"
Jack: "No, I did not know that, is that true?
Tyler: "That's right. One can make all kinds of
explosives using simple household items."
Jack: "Really."
Tyler: "If one were so inclined."

And, of course, there's the soap thing. And the Walter White thing.
Better living through science...

Wed, 05/07/2014 - 16:24 | 4737220 TheMeatTrapper
TheMeatTrapper's picture

"Future debt slaves will be given the opportunity to sign up to help Uncle Sam fight them damn Ruskies and have their debt (and, quite possibly, lives) erased". 

This is EXACTLY what they have planned. You will also be able to have percentages shaved off your balance by performing "community service" to selected organizations". 

Wed, 05/07/2014 - 15:31 | 4737053 pelican
pelican's picture

Successful Parasites don't kill their host.

 

 

Wed, 05/07/2014 - 15:25 | 4737025 LawsofPhysics
LawsofPhysics's picture

"Winning" in the "new normal".

 

This should end well.  Just the same I think I will stand over...

 

 

 

 

 

 

 

 

 

 

                                                                                          ............here.

Wed, 05/07/2014 - 16:11 | 4737172 ebworthen
ebworthen's picture

Yeah, just like last time (2008).  I'm sure it's all a part of the plan. 

Tapeworm economy.

I have an acquaintance who's Son has defaulted on two used cars and had them reposessed (duh).  Local Volkswagen dealer was offering new car financing for people with a credit score down to 500, with a $500 down payment.  I bet they let him sign and drive just to move the inventory.

I'm seeing payday loan place commercials offering $5,000 for "bad credit, no credit, even bankruptcy!"  Hot babes who say "all we need is your signature!".

Wed, 05/07/2014 - 15:25 | 4737026 JPM Hater001
JPM Hater001's picture

Improvement!  94 is way better than 98...unless it was solely driven by a reduction in Student and car loans and not an increase in... Oh crap dont tell me that.

Wed, 05/07/2014 - 15:26 | 4737028 10mm
10mm's picture

Broke is broke. 

Wed, 05/07/2014 - 15:28 | 4737036 centerline
centerline's picture

doubespeak fail.  Off to the nearest re-education facility for you!

Wed, 05/07/2014 - 15:36 | 4737064 Unknown Poster
Unknown Poster's picture

Is financing provided by the blood bank?

Wed, 05/07/2014 - 16:28 | 4737171 cowdiddly
cowdiddly's picture

Not Doublespeak, it's double counting. Kid gets first student loan heads straight to car lot with down payment on a brand new car. While I, the working stiff have to be content to drive a 13 year old, worn out truck. Now I ask again, WHO is the sucker in the above statement. ME.

In this freaking economy not only is the car way over the edge of a cliff, it went over the edge going 120 MPH on a giant Evil Kinevil size ramp and the car is still gaining altitude and the passengers are still laughing doing shots and trying not to look down.

This will be a crash for the ages.

Wed, 05/07/2014 - 16:58 | 4737302 centerline
centerline's picture

Moral hazard is off the charts for sure.

Wed, 05/07/2014 - 15:34 | 4737058 NoDebt
NoDebt's picture

You're never broke if you can still borrow money you have no intention of repaying.

Wed, 05/07/2014 - 15:39 | 4737071 Grande Tetons
Grande Tetons's picture

Yeah,,,the kids with shitty degress look really worried.  Hey, they have been taught by the best!   

Truth be told, I used to look down upon the kids racking up debt. Now, ahhhhh....what the fuck...have fun. 

Wed, 05/07/2014 - 15:42 | 4737080 pods
pods's picture

Bath Salts and basket weaving FTW!

Wed, 05/07/2014 - 15:46 | 4737092 Grande Tetons
Grande Tetons's picture

I think the basket weaving majors will be able to one up my Econ degree. 

What can you do? Weave a basket!

What can yo do? Ummmmm....forecast...stuff. 

Wed, 05/07/2014 - 15:52 | 4737113 pods
pods's picture

Can you weave a sturdy rope out of reeds, say strong enough to hold a mans weight if a chair was kicked out from under him?

Wed, 05/07/2014 - 16:03 | 4737144 centerline
centerline's picture

That is reserved for post-graduate level studies (AKA Advanced Basket Weaving).

Wed, 05/07/2014 - 15:26 | 4737029 centerline
centerline's picture

http://hosted.ap.org/dynamic/stories/U/US_RECESSION_POPULATION?SITE=AP&S...

Oh no.  The dirty little "growth" word getting some press in an ugly way.

Hmmm....  finite planet versus need for perpetual growth...  (scratching head).

 

Wed, 05/07/2014 - 15:28 | 4737037 El Hosel
El Hosel's picture

$200,000 education and a $40,000 car, no child left behind.

Wed, 05/07/2014 - 15:39 | 4737051 813kml
813kml's picture

Tack on a $1,000,000 NINJA home loan and recent grads will be living the new American Dream.

Wed, 05/07/2014 - 15:30 | 4737044 Kreditanstalt
Kreditanstalt's picture

Why is more debt considered "good" to anyone except the banks?

 

Wed, 05/07/2014 - 15:36 | 4737063 NoDebt
NoDebt's picture

Because in a modern ecomony credit is an important way that money creation.... er, um..... oh, just stop asking so many questions and accept the pre-digested meme that's being fed to you.

Wed, 05/07/2014 - 15:40 | 4737075 Freewheelin Franklin
Freewheelin Franklin's picture

Not sure if being sarcastic, but according to popular beilief, debt fueled consumption drives the economy. 

Wed, 05/07/2014 - 15:51 | 4737110 centerline
centerline's picture

K was being sarcastic.  Just FYI.  Has been around awhile.

Wed, 05/07/2014 - 15:30 | 4737045 daveO
daveO's picture

Yellin 'lamented' student loans, lol. Debt slaves don't need to buy houses or stuff. Those are provided by the plantation owner. These days, that would be someone like Blackstone and food stamps.

Wed, 05/07/2014 - 15:43 | 4737067 Kreditanstalt
Kreditanstalt's picture

So...with houses at all-time highs c/o counterfeiting of money & credit and with inflation raging in just about everything else, especially food, healthcare, taxes, energy, fuel...WTF are we supposed to borrow FOR???

Wed, 05/07/2014 - 15:54 | 4737119 pods
pods's picture

The children of course.  Or the troops. Sometimes I get them confused.
But they both need us to keep spending, buying shit we don't need or the terrorists win.

pods 

Wed, 05/07/2014 - 15:55 | 4737121 centerline
centerline's picture

so bankers can live like rock stars?

(just guessing of course)

Wait...  Tanks in the Streets?  Doing God's work?  Hmmm....

Oh, bankers living like rock stars is for our own good.  I see.  I see.

(off to max out my cards...  I heard about this killer new 105 inch wrap around Teeee Veeee...  got to have my propoganda FULL size).

Wed, 05/07/2014 - 15:37 | 4737066 Sudden Debt
Sudden Debt's picture

cars.... keeping up appearences...

it's for the neighbours...

Wed, 05/07/2014 - 16:50 | 4737276 Kreditanstalt
Kreditanstalt's picture

Sometimes I think North Americans need a little Fear of Unemployment...this time hopefully it will strike those in the technical, trades, government, middle-management, resource industry sectors who never suffer, never lose their jobs, make tons of $$$ regardless and spend like there was no tomorrow.

Wed, 05/07/2014 - 15:43 | 4737078 Freewheelin Franklin
Freewheelin Franklin's picture

I gues that includes loans for vans down by the river? 

 

And, of course, the van can also be used as a place to hang your useless college degree.

Wed, 05/07/2014 - 15:48 | 4737099 youngman
youngman's picture

Think of the Me me Me first parents....the baby boomers..they dont want the kid living at home..so they let him go out and get a student loan forever...so he can keep parting and having a good time..and so can they...but in reality its just a subsidy for the universities...it keeps them afloat...half of them would go under without these loans....its a GM bailout that keeps going on and on and on

Wed, 05/07/2014 - 15:53 | 4737118 Spungo
Spungo's picture

We're nowhere near peak growth. Fucking 1/3 of the country is not working. There's lots of room to grow when the government stops actively trying to stall the economy.

Wed, 05/07/2014 - 15:55 | 4737123 pods
pods's picture

That might not work out so well when you see the price of gas with the last third driving to work.

In a nutshell, we are fucked.

pods

Wed, 05/07/2014 - 15:58 | 4737132 Obama_4_Dictator
Obama_4_Dictator's picture

Ouch...fractional reserve banking and debt system is breaking down right now, in front of us all...... Debt implosion is upon us...and in case you don't know, if the banks can't create more debt then the whole monetary system implodes.....happy Wednesday!

Wed, 05/07/2014 - 16:01 | 4737140 Typing Typer
Typing Typer's picture

I'm not surprised by this. I have a gaggle of these student loan people living here in my apartment complex. They are astoundingly childish and rude. By rights they would not be living in the same apartment building as a professional such as myself, but they pool their free student loan money and live (temporarily) way above their real means.

It's socially bizarre looking. It's a clear indication of how TPTB are barely keeping the whole country floating on food stamps, welfare, and college loan welfare.

Doesn't look like a glistening future for these very mentally and emotionally underdeveloped people. I, however, am glad I already became a skilled professional when there was a real market being fueled by real commercial activity. Seems like that was never the case, but it was, I saw it!

Wed, 05/07/2014 - 16:44 | 4737191 TruthInSunshine
TruthInSunshine's picture

The students literally living off of student loans, wearing the Che Guevara t-shirts, are pledges in the FSA.

Wait until they move onto SNAP/EBT-UEI-SSDI-ObamaVilles/Section 8 (aka Phase II).

Wed, 05/07/2014 - 16:11 | 4737173 yogibear
yogibear's picture

After subprime defaults as for another round of bailouts.

This time Jack Lew has Hank Paulson's  script.

Keep on adding debt and blowing bubbles.

Wed, 05/07/2014 - 16:27 | 4737225 Save_America1st
Save_America1st's picture

90% of all the GM car loans are also shit-credit sub-prime loans which are being bundled and sold aaaaaaaaaaaaaaaaaaaaall over again on Wall Street as AAA bundled securities.

So not only have We The People lost many multiple Billions on "bailing out" GM, i.e. the fucking criminal unions, but now they're chump and pumping their shitty cars to millions who can't and most likely won't pay back those shit-credit loans.

I think we all know how that's gonna play out once the ball starts rolling on those loan defaults and those "AAA" bullshit securities go in the shitter once again.

 

Wed, 05/07/2014 - 19:42 | 4737824 Chuck Knoblauch
Chuck Knoblauch's picture

I'm glad it's not revolving credit.

People are not charging vacations on their credit cards, if they know they cannot afford vacations.

Still, not enough as wages go south and food prices escalate.

Why is the crime rate so low?

I expect it to increase.

Get a job in law enforcement!

Wed, 05/07/2014 - 22:39 | 4738423 AdvancingTime
AdvancingTime's picture

The area we should pay more attention to is how the different sectors of the economy dependent on discretionary spending fared. I contend a shift is occurring within the ranks of shoppers and consumers that is causing the little economic growth occurring to be the "wrong kind of growth" and not healthy over the long term.

Recent job numbers create a false illusion that mask over what is really happening as incomes grind to a halt and inflation nibbles at the buying power of the average American. In my opinion the wrong people are buying the wrong things. Auto sales, student loans, and healthcare spending have become key drivers in this economy. Below I reconcile the recent job numbers and why spending trends signal danger ahead.

http://brucewilds.blogspot.com/2014/05/reconciling-april-jobs-report-wit...

Tue, 06/10/2014 - 05:04 | 4839791 payrollservices
payrollservices's picture

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