

US Consumer Credit Shows Steepest Contraction in Over 5 Decades - gasull
http://globaleconomicanalysis.blogspot.com/2009/08/us-consumer-credit-shows-steepest.html

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biohacker42
I'm not so sure about deflation, since we've replaced private credit with
public credit. But it's nice to see data indicating hyper-inflation is not on
the horizon.

And it's interesting to think what the world will look like when Americans are
savers and someone else, Asians?, are spenders.

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martincmartin
So is this good or bad overall? Because people are giving money to banks,
rather than spending it, it should be raising bank's capital. Right? So the
Fed won't need to give as much money to the banks, because people are giving
it to them to pay down their debt?

OTOH, if people aren't spending, then unemployment goes up, which is bad.

Unless people aren't paying down their debts, but rather going bankrupt and
the banks are writing them off. Then we're in trouble.

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gnaritas
People should be paying off debt, better yet, they shouldn't be living off
credit to begin with, it's unsustainable. Getting Americans back to living
within their means is not trouble, it's the long term solution.

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dmitri1981
While previous credit levels were too high, a reduction in credit means a
reduction and consumption and hence demand. Overall, this further shrinks the
economy, reducing income and thus savings.

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martincmartin
Ah, but in the current climate, where everybody is worried about banks
failing, another big bank failure could freak everyone out and cause another
catastrophe. So perhaps propping up the banks increases sentiment more than
increasing consumption in 2009?

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gnaritas
If a sustainable level of consumption can't support the number of banks
currently in operation, then some of them need to fail.

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zargon
Looks like consumers had too much credit.

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BearOfNH
This can be good news for startups. In a deflationary world theoretically VCs
won't need as big an ROI, meaning more funding for startups. Well, assuming
the startups are doing things in line with the economy. In this case that
would be things like bargain shopping, DIY repairs, productivity enhancement,
etc. Been done a thousand times before? Then help folks figure out who does it
best.

