Consumer Debt Jumps Sharply

[NVMojo]

The increase suggests that Americans are relying more on credit cards as gasoline costs rise, economists say.
From Bloomberg News
August 8, 2006

Consumer borrowing unexpectedly accelerated in June as Americans used credit cards to finance more of their purchases, a Federal Reserve report showed Monday.

Consumer credit, or non-mortgage loans to individuals, rose $10.3 billion to $2.19 trillion, following a revised $5.89-billion increase in May. The two-month gain was the biggest since September-October 2004.

Americans are relying more on credit card debt because rising interest rates and a cooling housing market make it harder for them to take out home-equity loans. Higher prices at filling stations are also prompting consumers to borrow more, economists said.

"The jump in consumer credit coming at a time when consumers are hard hit by soaring gasoline costs could indicate some financial woes on the part of borrowers," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. "It looks as if consumers are relying more on credit cards now that other avenues of credit such as mortgage refinancing have been shut off to them."

more...

http://www.latimes.com/business/investing/la-fi-credit8aug08,1,1217902.story?coll=la-headlines-business-invest

[Nay]

1. Well, this can't be good -- running up the CC for gas. And how is

it that anybody out here has any credit left, after the wave after wave of refinancing, etc.? What the hell are people doing?

[Roland99]

2. Wow! "They" were expecting a drop to less than $4 billion!

[SpiralHawk]

3. All part of the BushCo-republicon strategy to convert the average

American to prole status, so the "elite" can prevail in their Brave New Christo-fascist World.

Everyone is equal, of course, but Corrpupt republicon cronies are "more equal"

Propaganda is truth.
Ignorance is strength.
Poverty is wealth.

Always remember: Big BushCo loves you.

[1932]

15. ...paging FDR...

[TexasLawyer]

32. very cynical, SpiralHawk

but possibly very accurate!

[Vinca]

4. Not surprised.

My husband's business is connected to home refinancing and it's starting to boom.

[ixion]

5. so instead of paying $3 bucks a gallon, they'll pay

5 or 10 or 20, when you figure in the interest charged by the CC.

This sentence is very curious:

"Americans are relying more on credit card debt because rising interest rates and a cooling housing market make it harder for them to take out home-equity loans."


Now, this is written in a matter-of-fact tone, when in fact it should be written in an alarming tone, because interest rates are rising on credit cards, just like home equity loans. I find it curious that the article fails to draw this simple connection, and in fact WARN people about doing this.

[sendero]

6. That's the problem with Americans..

.... they don't know WHEN to be alarmed.

[lastliberalintexas]

20. Either scenario should be alarming

The fact that a fairly good size segment of the US population has to rely on ANY kind of credit, be it credit cards or home equity loans, for a staple such as gasoline is frightening. And implicit in that sentence is the apparently accepted fact that people have been relying on home equity loans to maintain their lifestyles and/or merely pay the bills, which scares the hell out of me. I wonder what a real economist (ie, not a Bush flunkie) would say about such a situation?

[ixion]

21. good point.

:applause:

[MissB]

24. No kidding.

I cannot imagine using my home equity to finance my life. I can see tapping into it to make improvements. I can't see using credit cards for everyday stuff either. I'm shocked that there is apparently a good segment of our society that thinks that way.

Holy shit.

[Nay]

30. Holy shit indeed. I know dozens of people who are doing just that.

I've been alarmed for years. I have threatened my kids with early death if they EVER get into a debt situation over gas or junk consumer items. Mom will NOT be bailing them out.

[ClintonTyree]

7. Americans will not change their spending habits.........

they'd rather go heavily into debt than cut back and change their "American way of life". Our country's rampant consumerism cannot be reigned in, and why SHOULD they cut back? Our government is spending trillions it doesn't have, why should good, red-blooded Americans be any different? It's our god given right to have those expensive things, god WANTS us to spend! What are we fighting a war in Iraq for IF NOT for the right of every American to consume much more than is needed? :sarcasm:

[4dsc]

8. Here here..

What we need is more anti consumerism in this country.. Consumerism is destroying the world is a sad symptom of greed..

Quit buying what you really don't need and pay off your debt!!

[Zorra]

9. $2.19 trillion...wow. If everyone stopped paying off their credit cards

all at the same time, the system would collapse overnight.

[wicket]

10. Sounds almost Fight Club-esque

n/t

[NVMojo]

18. yeah, I'm liking it!

[wicket]

28. Time for the revolution!

:D

[Javaman]

11. This is the speeding train roaring down the track, no brakes...

and a brick wall at the end.

When gas goes up to 5 bucks, this country will be in a world of shit.

People will continue to get more and more credit cards to pay for gas and the various items of useless shit they don't need, but they won't cut back on their driving, take mass transit or really think about whether or not they need the crap they buy.

If this trend continues, which I believe it will, I say in about 5 years, the way things are currently going, we as a nation are going to be in a world of shit.

The coming depression won't hit like a bolt from the sky, like in 1929 (actually that didn't either but people were in as much denial then as they are now), this one will creep up on us to the point where one day, the housing market will collapse, cars will be abandoned on the road little by little and people will quietly starve to death behind closes doors so as not to appear embarrassed in public.

We live in some truly strange times.

[salib]

12. Getting close to $10,000 per person in unsecured debt

And no insurance, like bankruptcy, to fall back on.

Just think, if you make minimum wage, you barely make as much in a year as the average debt!

[NVMojo]

19. they can thank Dems like Harry Reid for the bankruptcy bill passing

[madrchsod]

13. count me out of the cycle

i have 0 credit rating and i now travel 3 miles to work...i guess i can consider myself lucky

[Nay]

31. We've been out for years as well. Only have a little bit of the house

mortgage left. Otherwise, if we can't buy it with cash,it don't get bought.

[1932]

14. against their will. Remember how much cc debt Americans paid off after

bankruptcy law changes? Sadly, it was only to make room for gas bill.

[PA Democrat]

16. The US savings rate was already in negative territory in 2005.

This doesn't bode well for the future.

http://www.msnbc.msn.com/id/11098797/

[paparush]

17. I've been telling my friends for years that the REVOLUTION will begin..

when easy credit ends.

[Supersedeas]

22. Everything is going according to plan???

[Anakin Skywalker]

23. Bushites Getting Richer From This

since the mofos are all heavily invested in the oil and banking industries.

[Doctor_J]

25. "The economy's booming!"

especially if you are in the owing class

[tanyev]

26. So who are the jeenyus financial analysts that didn't expect this?

"Unexpectedly". Hmph.

[Wcross]

27. If you have consumer debt you are living above your means.

Face it, consumer debt is a sign you can not afford to live the lifestyle that you have become accustomed to. At some point people will have to change their spending habits. They can do it by choice or by force.
I am sure there are plenty of hard luck stories- medical debt charged, job loss financed with credit cards and other extraordinary expenses.
What about the excess though? I have no pity for someone who bought the most expensive home the bank would finance, the gas sucking SUV to keep up appearances and dining out more than in.
I work at a place where the average wage is 50,000 a year (union plant) and some of these people are really on the edge. Contract talks are going on and they are not slowing down their spending. I suspect some of them don't really understand finance, it seems like they borrow up to the point that they can meet the monthly minimums.

[shrike]

29. This gentleman sees things differently

Although I do agree there are those who overspend; I know some of them personally:

http://www.msnbc.msn.com/id/14251360/


Aug. 9, 2006 - For the first time ever recorded, Americans owe more money than they make. Household debt levels have now surpassed household income by more than eight percent, reaching 108.4 percent in 2005, according to a May 2006 study by the Center for American Progress. Consumer debt is now at a record $2.17 trillion, reports the Federal Reserve Board and consumers cashed out a whopping $431 billion in home equity last year.

Christian E. Weller, the author of a recent Center for American Progress (CAP) report, 'Drowning in Debt,' says the middle class, specifically, is struggling. Wages have been stagnant and they're losing the battle to keep up with the cost of living. "The data shows that people are borrowing more money not because of over-consumption, but because they're caught in a bind," says Weller, a senior economist at the CAP. "In that bind, the only escape valve for middle class families is to borrow more money." NEWSWEEK's Jessica Bennett spoke with Weller about the scope of America's debt, why it's so hard to get out from under, and how it will affect the economy in the future.