Karl Denninger, "Consumer Credit: Disaster, Down $12 Billion"

"Consumer Credit: Disaster, Down $12 Billion"

by Karl Denninger

*U.S. AUGUST CONSUMER CREDIT WAS FORECAST TO DROP BY $10 BILLION
*U.S. AUGUST NON-REVOLVING BORROWING FALLS BY $2.07 BILLION
*U.S. AUGUST CREDIT CARD, OTHER REVOLVING DEBT FALLS $9.91 BLN
*U.S. JULY CREDIT FALLS $19 BLN, REVISED FROM $21.6 BLN DROP
*U.S. AUGUST CONSUMER CREDIT FALLS $12.0 BILLION, FED SAYS

"Without "cash for clunkers" it would have been significantly worse of course. Best guess non-revolving would have been down close to $10 billion, so roughly equal to July. There's no possible good way to spin this. There is no sign that credit expansion has reappeared, there is no sign that we have seen a turn in employment, and there is no evidence that we are seeing real improvement in final demand.

To those who have said that "the recession ended this summer", how do you make that case when the consumer is not spending? When credit continues to contract even with programs like cash-for-clunkers? This is not a "trivial amount of money" either, especially when one considers that historically this has been positive by roughly the same amount, meaning that the swing is roughly double that, or about 2% of GDP.

The real economy is effectively dead. What's worse is that the idiots at The Fed the Washington are still refusing to force the insolvent to take their marks and clear the credit markets. As a consequence there is no meaningful evaluation of what constitutes a reasonable credit risk being made - the answer is simply "no" both for borrowers and lenders, as borrowers (correctly) see a deeply deteriorating economy while the government continues to lie.

This is not how to build confidence, yet confidence is everything. Confidence that the numbers you see printed every month in statistics are truthful. Confidence that when things suck, you'll be told they suck so you can prepare and try to do your best for your family, your employees, and your friends. Instead we keep hearing cries of a false dawn, but these cries are not errors - they are intentional acts designed to do the same thing George W. Bush did after 9/11 - "Go out and SHOP!"

What the government and media crooners forget is that you rarely get to screw the same person more than once, and unlike the circumstances of the 1930s, the people who got hosed in 2001 are still alive and remember it. Wake up folks; there's a hard rain coming and it's time to put up the storm shutters."

- Karl Denninger, http://market-ticker.denninger.net/

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