{"id":181459,"date":"2010-01-14T14:23:00","date_gmt":"2010-01-14T19:23:00","guid":{"rendered":"tag:business.theatlantic.com,2010:\/\/3.33500"},"modified":"2010-01-14T14:24:09","modified_gmt":"2010-01-14T19:24:09","slug":"the-myth-of-2009s-great-consumer-deleveraging","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/181459","title":{"rendered":"The Myth of 2009’s Great Consumer Deleveraging"},"content":{"rendered":"

Pundits and analysts have recently celebrated yet another reduction in U.S. consumer debt<\/a> as a sign that we’re in full-on recovery mode and the worst is behind us. Last week the Federal Reserve released data<\/a> on consumer credit through November 2009. I checked out the data myself and found that all that consumer deleveraging we’re hearing about is a big fat myth.<\/p>\n

\"bigcreditgraph.png\"<\/a>The above chart (Click it! It gets bigger!) shows both the total amount and monthly percent
\nchange in both revolving and non-revolving consumer credit from 2000
\nthrough 2009, the most recently available datapoint. Let’s look at revolving and non-revolving credit:<\/p>\n

–Revolving credit peaked in August 2008. It’s down 10% in the last year, but up a whopping 42% over the last decade. <\/p>\n

–Non-revolving credit (student, boat,
\nand other loans not secured by real estate) peaked in January, 2009,
\nand has only decreased 1% since. Since January 2000, non-revolving debt increased a whopping 72%. On a
\nper-capita basis, from the end of 2001 through 2009, outstanding household revolving credit increased
\nalmost 18%, while non-revolving credit outstanding increased almost
\n42%.<\/p>\n

Contrary to the claims of several notable pundits, there was no
\n“Great Consumer Deleveraging” in 2009, nor was there one in 2008. After peaking in mid-2008, mortgage debt decreased only 1.8%
\nthrough the third quarter of this year. With unemployment sticking around 10 percent and benefits ending for many recipients, I see delinquencies and
\ndefaults continuing to rise throughout the year, which I believe is
\ncorroborated by historical FDIC data<\/a>.<\/p>\n<\/p>\n

We often hear the statistic that “consumer spending makes up 70% of GDP.” But we don’t often hear the logical follow-up question, “Why is that a good<\/i> thing?” When growth in consumer spending is funded with debt rather than rising increased incomes, collapse is inevitable.<\/p>\n



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Pundits and analysts have recently celebrated yet another reduction in U.S. consumer debt as a sign that we’re in full-on recovery mode and the worst is behind us. Last week the Federal Reserve released data on consumer credit through November 2009. I checked out the data myself and found that all that consumer deleveraging we’re […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-181459","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/181459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=181459"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/181459\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=181459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=181459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=181459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}