A huge shift in stimuli and costs, destroying entire industries and giving fat to others.
By Wolf Richter for Wolf Street.
American consumers – let’s face it, consumption is the number one job during this trying time – have paid their credit cards again.
October In October, credit card balances and other rev credit lending credits fell again from the previous month, and fell 10.3% from October last year, the biggest decline in a year-over-year period, the biggest drop in a year. Financial Crisis (-9.9% in January and February 2010):
On a federally adjusted basis, credit card balances and other revolving credits fell to 9 980 billion (the green line in the chart below), according to Federal Reserve data this afternoon – the balance was first seen in October 2007, 13 years of inflation and population. After growth.
Not adjusted, credit card balance and other revolving credit has reached 33 333 billion (red line), which was first seen in August 2007. Since the peak started in December last year, the balance has fallen by 1 151 billion.
And this is what we’ve seen in other data: Seasonal adjustment will no longer be able to adequately capture the new way of taking b that ignores seasonality. Excellent utu in consumer lending, established over many decades and quite predictable, has been interrupted by events:
The mega-sinking in credit card balances in April had the dual effect of the stimulus payments that applied to credit card balances and the lack of spending opportunities when in large parts of the economy, where consumers typically use their credit cards to spend money. , Closed, such as malls, restaurants, cruises, airplanes and hotels.
Before the financial crisis, there was never a year-on-year decline in revolving credit. In the early years, for decades, Americans were in a position to swim iling on credit card debt with a surprising passion and a double-digit year-over-year boom that allowed them to buy things and do things they could not afford, and that U.S. . Crank the economy. The scheme continued to falter during the financial crisis, which led to a year-on-year decline in the first year. Now the second-year decline and the biggest fall ever:
It is now clear that in this supernatural economy there has been a massive change in how and what money consumers spend, destroying entire industries and giving fat to others – the total is still negative, compared to the reduction in consumer spending. Last year
Spending stimulus has been driven by money and additional unemployment benefits, and is recorded by the low mortgage rates due to the tsunami of mortgage refinancing resulting in lower monthly payments, freeing up money to spend on materials, while many homeowners have cash. -Out refinance, encouraged by the rising prices of their home, and thus spent on money released or borrowed against their home, and some of it is used to pay off credit card balances or prevent them from increasing .
And for those customers who are able to pay their credit cards, the good thing is, banks and credit card companies always charge high interest rates like 25% or more in a zero-interest-rate environment.
For banks and credit card companies, it’s hard luck because they charge high interest rates, which is why they make huge fat profits. No doubt, the Fed and economists are concerned about this growth of customers streamlining the most profitable business of banks.
But consumers who can get in and out of their credit card underwear should rejoice because there are so many items they can buy with the money they don’t spend on% 10,000 at 25% interest. Credit card debt.
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