MaxedOutMama
Tuesday, September 08, 2009
I Wondered
Rather an amazing G.19 Consumer Credit Outstanding issue for July. Total consumer credit drops 10.4% (annualized basis, seasonally adjusted).
Revolving drops 8%. Non-revolving, which is mostly car loans but also stuff like student loans, drops 11.7%. This release does not include debt secured by real estate or home loans.
On a currency basis, revolving credit stood at 897.9 billion, which is back to 2006 levels. Non-revolving stood at 1559.7 billion, which is back to 2007 levels. [Edit: These are non-seasonally adjusted numbers. SA numbers are 905.6 billion and 1,566.5 billion. But needless to say, seasonal adjustments don't mean that much right now on the debt topic.]
Off hand I would say that some persons took advantage of the cash for clunkers program to trade in an older expensive car with high outstanding loan balance for a cheap new car which qualified, and in the process reduce their auto loan outstanding. Of course, there is always the BK route.
These releases can be revised quite a bit, but the movement in this one was so big that it's hard to think it isn't very real. Maybe we should rename that cash-for-expensive-used-cars program.
PS: This calls for a soundtrack, and the best I can think of is Chris Rea's "Working On It"
Revolving drops 8%. Non-revolving, which is mostly car loans but also stuff like student loans, drops 11.7%. This release does not include debt secured by real estate or home loans.
On a currency basis, revolving credit stood at 897.9 billion, which is back to 2006 levels. Non-revolving stood at 1559.7 billion, which is back to 2007 levels. [Edit: These are non-seasonally adjusted numbers. SA numbers are 905.6 billion and 1,566.5 billion. But needless to say, seasonal adjustments don't mean that much right now on the debt topic.]
Off hand I would say that some persons took advantage of the cash for clunkers program to trade in an older expensive car with high outstanding loan balance for a cheap new car which qualified, and in the process reduce their auto loan outstanding. Of course, there is always the BK route.
These releases can be revised quite a bit, but the movement in this one was so big that it's hard to think it isn't very real. Maybe we should rename that cash-for-expensive-used-cars program.
PS: This calls for a soundtrack, and the best I can think of is Chris Rea's "Working On It"
Comments:
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I don't follow your cash for clunkers logic. The "cash" was only $3500 or $4500. The cars bought necessarily cost more than that (rebate was for new car purchases only), while the clunkers were certainly worth less. The program should have resulted in an increase in CC outstanding, no?
This actually makes me wonder without cash-for-clunkers how bad would the CC number have been?
This actually makes me wonder without cash-for-clunkers how bad would the CC number have been?
# posted by 
: 4:01 PM
: 4:01 PM
Gee, if the credit card issuer doubles the interest rate, the borrower who can afford to quits using the card and pays down the balance? Fancy that!
Allan - no, the clunkers need not have been worth less. For one thing, some consumers may have been trading in two cars. The salvage value of the car was included in the deal for the consumer - the "clunker" wasn't resold, but it could be stripped, and I believe a lot of them were.
And a lot of the cars bought were smaller. Hyundai, for example, did well off the deal.
It's sad, but a lot of consumers are underwater in their car loans to a large degree. I really don't understand how we could get these numbers unless something like this happened. I'm guessing you won't see the same thing for August, because I think the people who did this had already planned it out and then were first in on the clunkers program.
Because of higher gas prices, resale values of a lot of quite big trucks and SUV-type vehicles plummeted.
It seems like over the last few months some of these prices are moving up again. Try www.trucktrend.com.
And a lot of the cars bought were smaller. Hyundai, for example, did well off the deal.
It's sad, but a lot of consumers are underwater in their car loans to a large degree. I really don't understand how we could get these numbers unless something like this happened. I'm guessing you won't see the same thing for August, because I think the people who did this had already planned it out and then were first in on the clunkers program.
Because of higher gas prices, resale values of a lot of quite big trucks and SUV-type vehicles plummeted.
It seems like over the last few months some of these prices are moving up again. Try www.trucktrend.com.
John - well, you can also opt out, stop using the card and pay it down. It is hardly surprising that many people are doing just that.
But what struck me on this report was the remarkable drop in non-revolving.
But what struck me on this report was the remarkable drop in non-revolving.
OK, thanks MoM. I suppose given the magnitude something extraordinary must be at play.
# posted by : 6:32 PM
: 6:32 PM
Anon - no home loans. Yes, one can't say that this isn't deflationary, although credit would have to decline regardless. We just overborrowed.
But really, one is not surprised at the credit cards (revolving). Those rates are high. The striking decline in non-revolving is another kettle of fish, although we should all remember that so many people were underwater in their car loans that this also is the natural trend.
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But really, one is not surprised at the credit cards (revolving). Those rates are high. The striking decline in non-revolving is another kettle of fish, although we should all remember that so many people were underwater in their car loans that this also is the natural trend.
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