That the just released consumer credit update for April missed expectations of a $11 billion increase is not much of a surprise. As noted earlier, the US consumer has once again resumed deleveraging: April merely saw this trend continue with revolving credit declining by $3.4 billion, offset by the now traditional increase in student and subprime government motors car loans, which increased by $10 billion. In other words, following a modest increase in revolving consumer credit in March, we have another downtick, and a YTD revolving credit number which is now negative. Obviously the government-funded student loan bubble still has a ways to go.
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No: all of this was expected. What was very surprising is that as noted in the earlier breakdown of the Z1, the entire consumer credit series was revised [8], with the cumulative impact resulting in a major divergence from the original data series. Why did the Fed feel compelled to revise consumer credit lower? Simple: as debt goes down, net worth goes up, assuming assets stay flat. Which in the Fed's bizarro world they did! Sure enough, if one compares the pre-revision Household Net Worth data (which can still be found at the St. Louis Fed [9] but probably not for long) with that just released Z.1, [9]one notices something quite, for lack of a better word, magical. Ignoring the March 31 datapoint which does not exist for the pre-revision data set, at December 31, household net worth magically grew from $58.5 trillion in the original data set to $60.0 trillion in the revised one!
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And that, ladies and gentlemen, is how you "create" $1.5 trillion in net worth in this wonderfully wacky fiat world, with the wave of a magic wand, or the push of a revision button.
We hope all of you feel $1.5 trillion wealthier as of this post.