U.S. Consumer Credit Dropped by $7.9 billion, the most since 1943 when it was tracked

October 7, 2008 by · Leave a Comment
Filed under: Industry News 

Wow, the tide is really going out quick. What is even more interesting is that lending that is secured by property (Home Equity Loans) is not tracked in this statistic. I believe if it was it would be even more drastic if that figure was included. I will do some research to see if I can find that number or please post it in the comments below and I will repost. The main fact is easy money through credit is over and this is reducing the U.S. consumers purchasing power and that is having a global effect. We need to get back to basics and people need to learn how to live within their means and if they want to go above that then they will need to think out of the box and work hard. Plain and simple.

Article:

Borrowing by U.S. consumers unexpectedly fell in August by the most on record as banks shut off access to loans, a report from the Federal Reserve showed.

Consumer credit fell by $7.9 billion, the most since statistics began in 1943, to $2.58 trillion, the Fed said today in Washington. In July, credit rose by $5.2 billion, previously reported as a $4.6 billion gain. The Fed’s report doesn’t cover borrowing secured by real estate.

Consumer spending, the biggest part of the economy, is likely to keep faltering as banks hoard cash, job losses mount and property values drop. The decline in borrowing underscores why Fed policy makers today announced they will create a special fund to purchase commercial paper in a bid to open the flow of credit to the nation’s businesses.

“This is what happens when consumers are fearful and banks tighten lending standards to all applicants,” said Richard Yamarone, chief economist at Argus Research in New York. “No one borrows, no one lends. It’s a classic example of a frozen credit channel.”

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