Saturday, February 07, 2009

Use it and lose it

Credit Card use continues to collapse.


The Federal Reserve issues a comprehensive report called G19 every month. It ain't very interesting unless you know what to look for. Much like yesterday's discussion of the equally information heavy EIA inventories the G19 is screaming "pull up, pull up!" The trillions in liquidity injection has had a negative effect on the 68% of the economy that is consumer consumption. And why not? Look at the 2% jump in new car auto loan rates in December. Reminds me of the old Irish joke.

Paddy: "Shawn, Shawn, I'm afraid this is it. I am at death's door and I have last request. When I'm gone pour this bottle of 40 year old Irish whiskey over me grave."

Shawn: "Of course old friend, anything but I have a question. Diya mind if I strain it through me kidney's first?"

And that's what we are getting, liquidity strained through the bankster's kidney's.

More on the multiplier effects of collapsing consumer credit later but for now ponder the fact that perhaps as much as half of decline isn't credit being paid down but written off by the banks.

13 comments:

Tyrone said...

First rate news!

w said...

Take a second to view this video.

Lost Cause said...

Credit card use reminds me of a joke once told by John McCain about a lady who was raped by a gorrilla, except most consumers are not asking for a call back. Do they really expect repeat business after subjecting their customers to such abuse? I hope all of the bank go broke. And I hope that they don't call me while I am eating dinner.

Teri said...

This is like an onion: each passing week reveals a new layer of stinking stuff, that was just hidden behind the surface.

How do you envision this spyral ending? Unemployment level of 12%? Nationalized banking/insurance? Dow at 7000 and S&P at 500?
Just curious... how are you positioning yourself to fend off the storm and be position to take advantage of the (eventual) recovery?

-Teri

Lost Cause said...

Teri -- my opinion only. I am not worried. Already I have been scrambling for the past five years, so this is business as usual for me. Except that I might not have the threat of well funded corporate giants to compete against. This is going to be good for the common man in the long run. Mark my words -- you are the enemy of the monied elites, and what is bad for them is good for you.

Rob Dawg said...

How do you envision this spyral ending? Unemployment level of 12%? Nationalized banking/insurance? Dow at 7000 and S&P at 500?
Just curious... how are you positioning yourself to fend off the storm and be position to take advantage of the (eventual) recovery?


Spirals don't end, they collapse. I've called for U-3 of 12.5% and have been quiet about the Dow/S&P lows preferring instead to be satisfied staying a few months ahead of events. I don't see how we avoid 6800/540 but not just yet. I've said here and elsewhare that the nationalizaion is the only viable option left. That doesn't mean we won't try all kinds of unviable options first.

Jean ValJean said...

It's reality check time for one Dallas homeowner.

Casey Serin said...

Credit card use is declining? They must not have surveyed my parents' and me. Even if 5,000 other people said they were using their plastic less, I would have singlehandedly counterbalanced the credit usage. :-p

Back to the bank it goes!!

Teri said...

In a way, it's reasuring to see that I'm not alone thinking about 12% unemployment, and another 15-20% drop in the markets. However, I certainly would love to be wrong and just overly pessimistic...
When do you see a leveling-out in the economy, and a start of the recovery? Me thinks around 2011.

tj and the bear said...

Teri,

You are not overly pessimistic. You may in fact be optimistic, since circumstances are so bad that even the more bearish among us don't really want to contemplate the consequences.

The problem with "recovery" is one of definition. Dawg & I are big on demographic factors, and those could have us bouncing around a bottom for another decade.

Lou Minatti said...

Screw that. I use my MC to pay for everything except property taxes. (They charge 3%.) Everything else goes on the card.

I never carry a balance and every December I get a roughly $1000 credit applied to my account. For me, credit cards are a great financial tool!

Lou Minatti said...

Jean, that Dallas house. Was it a POS flipper/fraud house in a 'hood? That decline is scary.

Rob Dawg said...

Lou. You want decline. Wait a few minutes for the previously scheduled post coming.

Anyway, Teri, listen to the posters here. It's kind of a slow drip and it would take a lot to get everyone to get their whole story out. I peeked out in October and determined that there was 6 more months of freefall. Come April I hope to have some supporting data for a solid bottom. All I know now is that it ain't in 2009.