RandomGuy
11-09-2010, 09:41 AM
For all the poltical bullshit being slung about which party is to blame, this trend is, in my opinion, the single greatest cause of the lackluster economic growth of the last year.
Not really noted much outside of the business press, it is important to understand. Banks, although attacked for not loaning money, are finding less demand for the loans they are willing to give out. That and overall decline in credit scores from the millions of people who have defaulted on their mortgages, leads me to think that the single greatest driver of the US economy, the consumer, will continue to pare back their debt.
That is, to me, a good thing.
It is one of the reasons we should not expect a stellar recovery any time soon. The rubber band of personal debt has stretched all it can, and we are collectively easing up on that.--RG
Bloomberg article (http://www.bloomberg.com/news/2010-11-08/household-debt-in-u-s-declined-0-9-in-third-quarter-new-york-fed-says.html)
U.S. households cut their debt last quarter, borrowing less against homes and closing credit card accounts, according to a survey by the Federal Reserve Bank of New York.
Consumer indebtedness totaled $11.6 trillion at the end of September, down $110 billion, or 0.9 percent from the end of June, according to the New York Fed’s quarterly report on household debt and credit. Households have slashed about $1 trillion from outstanding consumer debts since the peak in the third quarter of 2008, the New York Fed said. :wow
U.S. households, facing a jobless rate that’s persisted near a 26-year high, have slashed debt and increased savings following the worst financial crisis since the Great Depression. That’s pared consumer spending and slowed the economic recovery, helping to prompt the Fed’s decision last week to start another round of unconventional monetary stimulus.
“Consumer debt is declining but only part of the reduction is attributable to defaults or charge-offs,” Donghoon Lee, a senior economist at the New York Fed, said in a statement. “Americans are borrowing less and paying off more debt than in the recent past. This change, which we continue to study carefully, can be a result of both tightening credit standards and voluntary changes in saving behavior.”
Individuals paying off their debt crimped their cash flow by about $150 billion in 2009, the New York Fed said. Between 2000 and 2007 borrowing increased consumers’ cash flow by $300 billion a year, according to the district bank.
Household Finances
Consumers are succeeding in improving their household finances, the report showed. Delinquency rates continued to decline, with 11.1 percent of outstanding debt in “some stage of delinquency,” down from 11.4 percent at the end of June and 11.6 percent a year earlier, according to the New York Fed. Household delinquent debt fell 8.2 percent from the previous year to $1.3 trillion, the survey said.
Arizona, California, Florida and Nevada continued to have higher-than-average delinquency and foreclosure rates, according to the New York Fed.
Bank of America Corp., the largest U.S. lender by assets, earmarked $5.6 billion for credit losses in the third quarter, compared with $8.1 billion in the second quarter and $11.7 billion a year earlier. Net write-offs of uncollectible loans declined 25 percent.
“We can see the American consumer healing,” Bank of America Chief Executive Officer Brian T. Moynihan said in a Bloomberg Television interview last month. “We see delinquencies coming down in all our portfolios.” Bank of America is based in Charlotte, North Carolina.
New Bankruptcies
The amount of new bankruptcies fell 16 percent from the second quarter to 522,000, which is 1 percent higher than a year earlier, according to the New York Fed.
Mortgage originations rose 4.3 percent to $380 billion in the third quarter and are 26 percent higher than their low in the fourth quarter of 2008, the New York Fed said. They are about half their average levels from 2003 to 2007.
The report is based on data compiled by the New York Fed’s Consumer Credit Panel, the statement said. When the district bank released its second quarter report in August, it said the survey drew from a “nationally representative” 5 percent random survey of Equifax Inc. credit-report data, which encompass people with a Social Security number and a credit report.
Not really noted much outside of the business press, it is important to understand. Banks, although attacked for not loaning money, are finding less demand for the loans they are willing to give out. That and overall decline in credit scores from the millions of people who have defaulted on their mortgages, leads me to think that the single greatest driver of the US economy, the consumer, will continue to pare back their debt.
That is, to me, a good thing.
It is one of the reasons we should not expect a stellar recovery any time soon. The rubber band of personal debt has stretched all it can, and we are collectively easing up on that.--RG
Bloomberg article (http://www.bloomberg.com/news/2010-11-08/household-debt-in-u-s-declined-0-9-in-third-quarter-new-york-fed-says.html)
U.S. households cut their debt last quarter, borrowing less against homes and closing credit card accounts, according to a survey by the Federal Reserve Bank of New York.
Consumer indebtedness totaled $11.6 trillion at the end of September, down $110 billion, or 0.9 percent from the end of June, according to the New York Fed’s quarterly report on household debt and credit. Households have slashed about $1 trillion from outstanding consumer debts since the peak in the third quarter of 2008, the New York Fed said. :wow
U.S. households, facing a jobless rate that’s persisted near a 26-year high, have slashed debt and increased savings following the worst financial crisis since the Great Depression. That’s pared consumer spending and slowed the economic recovery, helping to prompt the Fed’s decision last week to start another round of unconventional monetary stimulus.
“Consumer debt is declining but only part of the reduction is attributable to defaults or charge-offs,” Donghoon Lee, a senior economist at the New York Fed, said in a statement. “Americans are borrowing less and paying off more debt than in the recent past. This change, which we continue to study carefully, can be a result of both tightening credit standards and voluntary changes in saving behavior.”
Individuals paying off their debt crimped their cash flow by about $150 billion in 2009, the New York Fed said. Between 2000 and 2007 borrowing increased consumers’ cash flow by $300 billion a year, according to the district bank.
Household Finances
Consumers are succeeding in improving their household finances, the report showed. Delinquency rates continued to decline, with 11.1 percent of outstanding debt in “some stage of delinquency,” down from 11.4 percent at the end of June and 11.6 percent a year earlier, according to the New York Fed. Household delinquent debt fell 8.2 percent from the previous year to $1.3 trillion, the survey said.
Arizona, California, Florida and Nevada continued to have higher-than-average delinquency and foreclosure rates, according to the New York Fed.
Bank of America Corp., the largest U.S. lender by assets, earmarked $5.6 billion for credit losses in the third quarter, compared with $8.1 billion in the second quarter and $11.7 billion a year earlier. Net write-offs of uncollectible loans declined 25 percent.
“We can see the American consumer healing,” Bank of America Chief Executive Officer Brian T. Moynihan said in a Bloomberg Television interview last month. “We see delinquencies coming down in all our portfolios.” Bank of America is based in Charlotte, North Carolina.
New Bankruptcies
The amount of new bankruptcies fell 16 percent from the second quarter to 522,000, which is 1 percent higher than a year earlier, according to the New York Fed.
Mortgage originations rose 4.3 percent to $380 billion in the third quarter and are 26 percent higher than their low in the fourth quarter of 2008, the New York Fed said. They are about half their average levels from 2003 to 2007.
The report is based on data compiled by the New York Fed’s Consumer Credit Panel, the statement said. When the district bank released its second quarter report in August, it said the survey drew from a “nationally representative” 5 percent random survey of Equifax Inc. credit-report data, which encompass people with a Social Security number and a credit report.