Consumer credit is lousy but that only puts it on par with all of the other asset sectors. From Rosenberg's daily missive:
Whether this is due to a lack of demand (the National Association of Credit Managers index fell in May) or supply, the reality is that banking sector is contracting and once the fiscal largesse is through the system, so will the economy. Banking sector assets contracted at a 10.8% annual rate and the declines were broad based:
-Residential mortgages fell 10.4% at an annual rate; -Home equity loans of credit fell 4.5%; -Commercial real estate loans slipped 8.9%; and, -Consumer credit slid at a 16.6% pace (with credit cards down an amazing 24.8%).
Consumer Credit: Not Nearly as Robust as Reports Claim [View article]
As with all of you, I don't want to see the economy roll over but paying down debt is eactly what the consumer should be doing as current levels of private indebtedness are unsustainably high, particularly with higher rates on the horizon. The market should view this as long-term strength, not weakness.
But I should not expect for the talking heads to understand that imbalances need to be addressed and corrected. We seem to live in a surreal economic la-la land in which the Austrians are ignored and thinking of Schumpeter and the process of creative destruction has been repealed. It's been replaced by a model of thought undergirded by the belief we can inflate or spend our way out of all economic problems known to man, avoiding any hint of pain.
As to the last report on incomes and spending, which showed an increase in the former and a decline in the latter to 3%, it's hard to reconcile all of the data and make sense of it. I think it's safe to say, though, absent reductions in debt spending could have been even higher, further reducing savings. As the author notes, this is not a particularly good sign though the reflationists applaud it even though it's not in our long-term interests.
Consumer Credit: Not So Rosy [View article]
Whether this is due to a lack of demand (the National Association of Credit Managers index fell in May) or supply, the reality is that banking sector is contracting and once the fiscal largesse is through the system, so will the economy. Banking sector assets contracted at a 10.8% annual rate and the declines were broad based:
-Residential mortgages fell 10.4% at an annual rate;
-Home equity loans of credit fell 4.5%;
-Commercial real estate loans slipped 8.9%; and,
-Consumer credit slid at a 16.6% pace (with credit cards down an amazing 24.8%).
Consumer Credit: Not Nearly as Robust as Reports Claim [View article]
But I should not expect for the talking heads to understand that imbalances need to be addressed and corrected. We seem to live in a surreal economic la-la land in which the Austrians are ignored and thinking of Schumpeter and the process of creative destruction has been repealed. It's been replaced by a model of thought undergirded by the belief we can inflate or spend our way out of all economic problems known to man, avoiding any hint of pain.
As to the last report on incomes and spending, which showed an increase in the former and a decline in the latter to 3%, it's hard to reconcile all of the data and make sense of it. I think it's safe to say, though, absent reductions in debt spending could have been even higher, further reducing savings. As the author notes, this is not a particularly good sign though the reflationists applaud it even though it's not in our long-term interests.