Don't look now, but things just got worse; [View All]

[katty]

more: http://www.urbansurvival.com/week.htm

Wednesday, April 8, 2009 07:55 CDT

This site is supported by subscription to Peoplenomics. For additional content, please subscribe.

Content mirrored at my other site: www.independencejournal.com,

Debt Disaster Growing
Don't look now, but things just got worse; in fact very much worse. I don't refer to the Italian earthquake which may have killed 250, nor do I refer to the U.S. electrical grid being "penetrated by spies". although that's all worrisome stuff, and a bummer, and all that. But no, it's not my candidate in either event for 'disaster of the year' because that shapes up to be in the field of economics.

I refer specifically to the collapsing consumer debt figures released by the Fed on Tuesday afternoon. As my friend Jas Jain is fond of pointing out: "It's the debt, stupid!"
The Fed's G.19 Consumer Credit (which is really debt) report shows that in the month of February, people cut back on revolving debt (think: credit cards) at an annual rate of 9.7 % while nonrevolving debt (think: house payments) increased a tiny 0l.2% annualized rate. Overall, debt was dropping at a 3.5% annualized rate.

Now let's think this through for a moment: What does it mean. Well, first and foremost this is a 'consumer economy' - and the aggregate spending of consumers is something that essentially determines the overall growth rate of the economy. Want to see a 20% nominal gain in the gross domestic spending? How about enticing consumers to spend 13% more annualized and do this against a background of 7% inflation; that'd work.