Consumer Credit Hits Record HIGH, Belying “Credit Crunch”

The “Credit Crunch” that Wasn’t

US total consumer credit hits record HIGH after a year of the so-called “credit crunch,” according to the Federal Reserve’s latest provisional figures released November 7, 2008.

The graph shows that 3rd-quarter 2008 total US consumer credit grew 3.7% above 3rd-quarter 2007, when the “credit crisis” began.

Not only did consumer credit not shrink, it grew.

September 2008 consumer credit is higher than the same month of any year prior, higher than the housing-bubble peak.

Index of US total consumer credit, growth year-over-year (YoY), September-September:

1998 = 1.00
1999 = 1.08
2000 = 1.19
2001 = 1.30
2002 = 1.40
2003 = 1.47
2004 = 1.54
2005 = 1.62
2006 = 1.69
2007 = 1.79
2008 = 1.85

Consumer credit expanded to 4 TIMES the Fed’s claimed 2% per year target for core inflation, which, after 10 years, would be a 2008 index of only 1.22.

A 2% growth rate will not double the initial amount until 36 years yet consumer credit nearly doubled in 10 years and continued its nearly relentless expansion during a year of what was supposed to be the worst credit crunch in memory.

• “Current” (2008Q3p) consumer credit would have to crash 12-13% simply to return to the 2005 level near the housing-bubble peak.
• “Current” (2008Q3p) consumer credit could crash almost 1/4 (24%) and still be higher than the 2002 level during Greenspan’s slide toward 1% Fed funds benchmark interest rate (dropped 50 basis points (bp) from 1.75% to 1.25% on 11/6/02).
• “Current” (2008Q3p) consumer credit would have to crash over 1/3 (34%) simply to reach the 10-year trend line for 2% annual growth from 1998 (22% higher than 1998--and we already were awash in credit in 1998).

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Update

Latest figures show total outstanding US consumer credit of $2.564T (2/09) at less than 1% from the highest point in history set at $2.583T (9/08) during the so-called "credit crunch," higher than any month before the so-called "credit crisis" began at $2.481T (8/07), and higher than any month during the massive credit boom.

8/07 "Credit Crunch" allegedly begins
2/09 Total outstanding US consumer credit is 3.3% higher than 8/07

Lending Keeps Growing, Growing, Growing

Total credit of all commercial banks (TOTBKCR), percent growth, Year over Year (YoY), remains well above 0 at about 2.5% growth (similar to the 1990s and 2001 recessions):


Total credit of all commercial banks (TOTBKCR), absolute levels show recent volatility but so far remain well above the pre-"Credit Crunch" levels of the massive global credit bubble:

Fed TOTBKCR

Even if consumer or bank credit does decline, does it decline by more than government debt increased or by more than money increased?

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The notion that we lack credit now is madness.

I explained over a year ago that we have no credit-supply crunch, but we do have a number of other crunches that policymakers ignore or misread.

The government continues its misguided bailouts and hyper-debt policies.

What This Means for Inflation Vs. Deflation

How To Vote Today: Last-Minute Information

Bi-Partisan Threats to You

What to do when both major candidates make a mockery of “change” and “reform.”

Barack Obama married into the infamous Chicago political machine (his wife Michelle was a Mayor Richard M. Daly staffer), built his career on corporate-welfare tax subsidies (the Annenberg Foundation, Chicago Annenberg Challenge (CAC), pushed the risky mortgages that contributed to the current global financial crisis, put former Freddie Mac chief executive and corporate lobbyist in his inner circle (vice-president (VP) selection advisor James A. "Jim" Johnson), picked a Republican John McCain clone for his VP (Joe Biden, an elderly, entrenched, establishment figure with some foreign-policy credentials), pushes Republican Mitt Romney’s health-care socialization, pushes his cousin George Bush’s tax cuts for "95%" (instead of "100%"), pushes his cousin George Bush’s wars in Afghanistan and the global war, and Obama thinks your biggest problem is that he has not been regulating you enough while he rejected regulations on himself and evaded federal campaign finance regulations (one rule for you, a different rule for him).

John McCain is one of the Keating Five scandal from the housing bubble and Savings & Loan (S&L) banking bailout of 20 years ago, sat and watched it happen all over again with the current mortgage/banking/financial crisis, picked a vice-presidential (VP) candidate (Sarah Palin) who rode the gravy train as mayor by hiring a lobbying firm to funnel your money to her small Alaska town of Wasilla (why not go all the way and pick "bubbles are for bathtubs" Kendra Todd as your VP?), talked about fiscal discipline and balanced budgets while he spent like a drunken sailor on the budget-busting $700 Billion Wall Street bailout—and the only thing that happened after he raced to DC to ram the bailout through is that his (and Obama’s) Senate larded the bill with even more pork (including rum, racetracks, and tax breaks for wooden arrow shafts), attacks Obama for being a socialist while comrade McCain pledges to socialize American housing by having the federal government go around the country buying houses--spending another $300 Billion of your money on bad mortgages, and he admitted he knows little about economics (neither does Obama) but that does not stop him from monkeying around with your economy, from the vast economic regulation of campaign-finance "reform" to the 2008 bailouts and nationalizations that will reverberate in your wallet for decades.

Libertarian candidate Bob Barr at least had the common sense and fortitude to take a stand and properly declare the McCain-Obama corporate payoff as “the bailout from hell."

It looks like people are even voting for Ron Paul (who warned us of Fannie Mae and the housing bubble at least as early as 2002) as a write-in candidate (check your local laws), where Ron Paul this morning won 7% in Hart’s Location, NH (AP, 11/4/08).