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August 08, 2008 – Comments (7)

From Bloomberg 

"Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 billion, previously reported as an increase of $7.8 billion. The Fed's report doesn't cover borrowing secured by real estate".

This means we all got $100,000,000,000.00 in rebates and still racked up more debt.

I think it is bad.

7 Comments – Post Your Own

#1) On August 08, 2008 at 8:10 PM, Tastylunch (29.26) wrote:

I do too

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#2) On August 08, 2008 at 8:33 PM, DemonDoug (82.62) wrote:

no no, see, everything's alright because we have a strong dollar, MBIA and Ambac are profitable, inflationary pressures are easing, monkeys are coming out of my butt, pigs are flying, and the Cubs are going to win the World Series.

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#3) On August 08, 2008 at 8:50 PM, devoish (98.52) wrote:

Well, as long as the pigs are flying, i guess we'll be ok

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#4) On August 08, 2008 at 9:22 PM, rd80 (98.45) wrote:

I also think it's bad; maybe pigs are flying if Devo and I agree :)

The article hints that the 'borrowing covered by real estate' may be down because of lenders scaling back on HELOC limits.  It would be interesting to see how the consumer debt picture looks in context with HELOC debt. 

Also a bit of a disconnect - "... non-revolving debt, including auto loans, increased $8.8 billion for the month." is followed later in the article by "...Cars and light trucks sold in June at a 13.6 million annual pace, and weakened further to a 12.5 million rate in July, pushing the industry toward its worst year in more than a decade.."  Auto loans have got to be by far the biggest chunk of non-revolving consumer debt.  Would be nice if the reporter could have dug a little deeper into that one.

This borrowing was in June, so it's possible people were charging purchases ahead of getting their rebate checks.  But it looks like more evidence that people are shifting from using the house as an ATM to using their credit cards.

It's looked like credit card debt might be the next big financial hit for some time now.  This article sure supports that thinking.

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#5) On August 08, 2008 at 11:24 PM, herztical (28.01) wrote:

thats why I shorted COF today (in real life)

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#6) On August 09, 2008 at 12:31 AM, nuf2bdangrus (< 20) wrote:

DD...ROFL.  A touch of Floridabuilder in that commentary.

 

I am surprised that banks aren't reducing unsecured revolving lines like they are home equity.  At least with the home, there' s some "security".  Perhaps revolving debts to this point aren't experiencing a multiple standard deviation loss abounts to set off the alarm bells in risk management  B of A still wants to give me more credit.

 

Revolving credit has been very profitable to banks....me thinks they are alseep at the switch.  Consumers that can't pay home loans certainly can't pay their credit cards.

 

And that is why this shall be the next shoe to drop in the great debt debacle.

 

Disclosure-short COF. 

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#7) On August 09, 2008 at 8:28 PM, AnomaLee (28.54) wrote:

This is great news for banks in the short term. Also, the Cubs are going to win the World Series...

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