Friday, February 6, 2009

Data Is Out: Consumers Have No Desire To Borrow

Confirming our expectations that the government's stupid idea of forcing consumers to borrow is, well, stupid, the latest release from the Federal Reserve indicates that consumer credit for December has in fact dropped by $6.6 billion to to $2,562.3 billion, after having dropped $11 billion in November. Both numbers were lower than consensus. And while Bloomberg spins this again to indicate that banks aren't lending, we think the flip side is true, in that consumers have no desire to borrow, and the core focus of all governmental programs, which is to stimulate lending and loosen lending standards yet again which is what got us in this mess in the first place, is flawed by extension.

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Gregman2 said...

The shift has moved from profit motive to one of security: people are focused on retaining versus building equity. I suspect the underlying reason has more to do with the Penn effect and the impact that global outsourcing has had on real wages.