U.S. consumer credit in August increased $18.1B

The Consumerist/Flickr

WASHINGTON Americans boosted their borrowing in August by the largest amount in three months with strong gains in the category that covers auto and student loans and in credit card debt.

Total consumer borrowing increased $18.1 billion in August compared to July, the Federal Reserve reported Friday. In July, consumer borrowing had fallen for the first time in nearly a year.

The rebound in August along with a separate report that showed the nation's unemployment rate dropped to 7.8 percent in September were viewed as encouraging signs for an economy that has been struggling in recent months.

• Credit card delinquencies hit 11-year low
• Auto sales, home prices help buoy weak economy
• American Express to refund $112M in unlawful late fees

The August borrowing gains reflected a $4.2 billion increase in borrowing on credit cards and a $13.9 billion increase in auto and student loans.

Retail sales rose in August, in part because consumers bought more cars and trucks. However, they were cautious elsewhere, as rising gas prices left them less to spend in other areas.

Activity through August left total consumer debt at $2.73 trillion, putting it 5.5 percent above the pre-recession peak for credit hit in July 2008.

Consumers have been using credit cards much less since the 2008 credit crisis. Four years ago, Americans had $1.03 trillion in credit card debt, an all-time high. In August, that figure was 17 percent lower.

During the same period, student loan debt has increased dramatically. The category that includes auto and student loans, along with other loans for items such as boats, has jumped to a level 20.3 percent higher than July 2008.

In the April-June quarter, student loans totaled $914 billion, according to a recent report from the Federal Reserve Bank of New York. That is a nearly 50 percent increase from the July-September quarter of 2008.

Much of the increase in student loans is because of high unemployment, which has led many Americans to go back to school in hopes of improving their education and skills in a more competitive labor market.

American finances have been improving. In a separate quarterly report, the Fed said last month that a jump in the stock market and rising home prices are bringing Americans closer to regaining the wealth they lost in the recession.

In the severe 2007-2009 recession, Americans lost nearly a quarter of their wealth, from a pre-recession peak of $67.4 trillion in the fall of 2007. Household wealth plummeted to $51.2 trillion in early 2009. But as of the April-June quarter, household net worth has risen to $62.7 trillion. The net worth figure is the difference between assets and liabilities such as mortgages and other loans.

While the Fed's quarterly report covers all household debt, the Fed's monthly consumer credit report covers only loans not backed by real estate, excluding mortgages and home equity loans.

[FormerUSMCSergeant]

I wonder how many of those with debt complain about the U.S. having debt......

[FormerUSMCSergeant]

An addage that would save million a lot of heartache:

IF YOU CAN'T PAY CASH FOR IT, YOU CAN'T AFFORD IT.

Using borrowed money to purchase goods and services doen't mean you can afford them. What it means is that you spend more than you make.

[FormerUSMCSergeant]

...millions.....

[robintoledo]

I have to agree. Americans depend too much on credit to have everything and anything. Credit is fine if it for a purchase that will gain in value over the years. It's bad for anything that will decrease in value, such as an automobile. Never use plastic for anything else unless it can be paid in full every month. We have been living beyond our means for years. Wages are now at a low level. We have to "bite the bullet" and start living within our means. No more fancy clothes, expensive dinners, the latest electronics and cars that are way over priced. It's time to drive the old clunkers, take the bus, walk and basically be debt free. The people on Wall Street often talk about "an adjustment". Now is the time for American to "adjust".

[FormerUSMCSergeant]

hypnotoad72 replies:
Do remember, without spending the economy would collapse.
---
Agreed.
I am not opposed to spending, just opposed to spending money you don't have which Americans appear to be hooked on in general.

Then they cuss the card issuers....stupid.

[hypnotoad72]

Well, I'm sorry college costs have skyrocketed, making student loans more than merely necessary... let's gut workers in every conceivable way and then blame them for spending.

Most companies want Bachelors Degrees. Even for entry level jobs, regardless of how they spin "entry level" as being.

Our system is broken, which is what these articles try to allude to, but they really don't mention the root causes...

[hypnotoad72]

Forgot to add - it's not loans, it's "investment".

And, of historical interest, even FOX (the TV network of the time) had a rather large 8-digit debt load back in the late-1980s...

[FormerUSMCSergeant]

The August borrowing gains reflected a $4.2 billion increase in borrowing on credit cards....
---
Americans love to spend money whether they have any or not.

[hypnotoad72]

The whole of the situation is a little more complex than what your one-liner will bear. I'll explain some of nuances:

Wages keep going down, so if nobody spent, where would companies get theirmoney from? Taxpayers? And, as a result, would that mean we are no longer a capitalist state? (oh, wait, companies - especially the larger ones - have been receiving taxpayer-funded handouts for decades, never mind the modern day bailouts such as TARP, QE1-3, Operation Twist, etc...)

Americans think there is no middle class future, so why give a damn?

And you've not read the nice list of articles going into corporate welfare and middle class stagnation I've provided in the past?


http://www.epi.org/publication/ib330-productivity-vs-compensation/
http://www.realitybase.org/journal/2009/3/10/the-american-dream-died-in-february-1973.html
http://www.csmonitor.com/Business/2012/0612/How-skewed-is-America-s-income-inequality-Take-our-quiz/Median-income/
http://www.nytimes.com/2012/05/13/opinion/sunday/fables-of-wealth.html
http://krugman.blogs.nytimes.com/2012/04/28/where-the-productivity-went/
http://motherjones.com/kevin-drum/2010/01/vicious-cycle-stagnant-wages
http://www.nytimes.com/2009/05/04/opinion/04krugman.html?_r=4
http://www.ctj.org/html/layoffs.htm
http://management.fortune.cnn.com/2011/03/25/unpaid-jobs-the-new-normal/
http://www.nytimes.com/2011/05/01/opinion/01eggers.html
http://greatdivide.typepad.com/across_the_great_divide/2009/06/walmart-workers-on-welfare-lets-look-for-the-spin.html
http://www.usatoday.com/news/nation/story/2011-09-13/census-household-income/50383882/1
http://www.thefiscaltimes.com/Media/Slideshow/2012/04/04/Minimum-Wage-and-What-It-Buys-You-1950s-to-Now.aspx?index=1
http://www.hollandsentinel.com/opinions/x13292164/COLUMN-American-workers-got-what-they-deserved
http://underthemountainbunker.com/2011/03/31/senator-bernie-sanders-guide-to-corporate-freeloaders/
http://www.truth-out.org/top-us-corporations-outsourced-more-24-million-american-jobs-over-last-decade/1303196400
http://www.ctj.org/html/corp0402.htm
http://money.cnn.com/2008/12/19/news/companies/auto_crisis/index.htm
http://www.sociology.vt.edu/course/socprobs/corporatewelfare.html
http://www.lawyersandsettlements.com/case/hiring-illegal-immigrants.html
http://ecosalon.com/squawk-our-tax-dollars-help-mcdonalds-hawk-chicken-in-europe/
http://www.progress.org/cwfedex.htm
?http://www.infoworld.com/d/adventures-in-it/why-us-it-jobs-arent-coming-back-465?source=fssr
http://hubpages.com/hub/HowH1BVisaFRAUDiskillingAmerica?
http://www.computerworld.com/s/article/9133529/U.S._H_1B_workers_outnumber_unemployed_techies
http://www.ourfuture.org/corporate-welfare
http://mydd.com/story/2007/2/7/184312/5388
http://acsa.net/press/savearticlegates.htm
http://money.cnn.com/2009/08/28/news/economy/paycuts/index.htm
http://www.larouchepub.com/other/2003/3045walmart_iowa.html
http://www.google.com/search?q=americans+train+replacements+H1B
http://www.youtube.com/watch?v=uJDhS4oUm0M
http://anti-union.blogspot.com/2008/11/greedy-american-union-auto-workers-and.html

Do remember, without spending the economy would collapse. People try to say we're a trickle down/supply-side economy, but that is spin. Without a healthy symbiosis, the whole paradigm is screwed. Devaluing work and wages does not help...

Neither does offshoring:

Giving taxpayer money to corporations that offshore (to communist countries). This means people in America are out of work as we're shipping jobs overseas. This also means we create a revenue problem and increased deficit because there are fewer working people to tax. And as the national debt gets larger, so does the interest owed on it. To the banks. That keep getting bailed out.

And people say "competition is good". It's good only if you're an existing top-tier company that is capable of using price wars and other predatory actions to kill competition. For competition deprives these top-tier entities of profit that they deserve more, just because they are big. It really is all about marketing, since - at least in the tech field - innovation alone goes nowhere. Otherwise BeOS would have destroyed the comparatively pitiful Windows, leeched-off-of-open-source OS X, and everyone else back in the late-1990s... including the free open source Linux, which wasn't as fluid with preemptive multitasking or symmetric multiprocessing (SMP)... BeOS had enough innovation, but our economy works on the ability to market and swindle people.

[hypnotoad72]

I do apologize for the cynicism of my response, but as wages stagnate and drop while costs rise, it becomes hard to live within one's means. Loans become inevitable, and as the rug is slowly pulled... remember:

http://www.csmonitor.com/Business/2012/0612/How-skewed-is-America-s-income-inequality-Take-our-quiz/Median-income/

http://motherjones.com/kevin-drum/2010/01/vicious-cycle-stagnant-wages

http://www.realitybase.org/journal/2009/3/10/the-american-dream-died-in-february-1973.html

There was more value IN work back then, making it easier for workers to save, live within their means, and all of the other "Old Normal" niceties. But in our New Normal:

http://management.fortune.cnn.com/2011/03/25/unpaid-jobs-the-new-normal/

Now wait until workers have to pay their own way TO work... oh, wait, BYOD is just about here... ;)

There is another slant one could write as well:

Well, maybe companies that offshore should stop being unethical and learn to live within their means. That way they can be just as patriotic citizens as those of us who do pay taxes and don't offshore work just to pocket the difference as so-called "profit" while whizzing on the workers that made them great in the first place, while reaping the nice things we have here because they paid into them. If they don't pay their taxes, they're degenerate leeches that don't deserve our respect. We pay our way, so why the heck aren't they?

You didn't expect any other possible perspectives, never mind patriotism, now did you? ;)