Minutes ago the January Consumer Credit report was released. It was expected to post an increase of $14.7 billion. Instead it rose by $16.2 billion. On the surface this would be great: consumers are spending more, levering up confident in the future, etc, etc. Alas, as always in the New Normal, the story was below the surface. Specifically, of the $16.2 billion rise, a tiny $106 million was due to revolving, or discretionary spending credit card, debt. The balance, or 99% of the total, was non-revolving debt, best known as student loans, and less known as GM NINJA car loans. And here is the scary math: in the past 12 months, of the $153 billion in total consumer credit increase, just $6.4 billion was in revolving credit. The balance: student and car loans.
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And where it gets even worse is breaking down the sources of credit. Because not only is the Fed supposed to monetize virtually all the US debt with a positive duration, it also has no choice but to directly fund the consumer debt.
Sure enough, in January, the biggest by far source of debt, was the Federal Government, which funded some $26 billion of new student and car loan, which as everyone knows, will never be repaid.
This was the fifth highest US government consumer credit injection in history.
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The math again: of the $153 billion in total debt sources in the past 12 months, 70% has been handed over by the Federal Government.
Source: G.19 [8]