Friday, February 20, 2009

Consumer Loan Growth: 10%

According to monthly banking data from the Federal Reserve, consumer loans have continued to grow at close to 10% (year-to-year) during the entire recession (see bottom chart above, click to enlarge). Notice in the top chart going back to 1950 that the positive consumer loan growth during the current recession is much different than the significant declines in consumer loan growth in every of the last nine recessions except the 1982 recession.

As much as we hear about a "credit freeze" and a "
credit crunch," the consumer loan data through January 2009 suggest a slightly different story.


At 2/20/2009 9:34 AM, Anonymous Anonymous said...

Please Perry. Have you checked out asset backed security (ABS) issuance lately? The last time I looked ABS issuance was down 82% in 2008.

You are missing the securitization market. Where's the missing $700 billion? Yep, the shadow banking system collapsed.

When are you GMU-types (Cowen, Tabborak) gonna figure it out?

At 2/20/2009 10:18 AM, Blogger Marko said...

Even if Mr. Anonymous is correct, and that is what I am reading as well, then this still shows that all the efforts to help BANKS because they are "not making loans" is misguided. If they need to help out the secondary securitization markets, things like finance companies, then why aren't politicians helping finance companies? I am really upset by all the political solutions to economic or financial problems. But I guess that is what the voting public wanted!

You were warned folks . . .

At 2/20/2009 10:43 AM, Anonymous Anonymous said...

Sorry, Marko. I should have made a further link.

Tim TurboTax Geithner is already on the record when it comes to the shadow banking system.

In his speech Geithner admitted that, "In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them. Because this vital source of lending has frozen up, no plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses -- large and small.”

Source: SmirkingChimp.

At 2/20/2009 7:30 PM, Blogger bobble said...

anon9:34". . . The last time I looked ABS issuance was down 82% in 2008. You are missing the securitization market."

yes, anon9:34 is correct. you can't judge consumer credit by just looking at banks

this chart nicely illustrates how securitization (green area on the chart) of consumer loans has virtually disappeared in recent months and *total* consumer credit creation has declined sharply

At 2/20/2009 10:15 PM, Anonymous Anonymous said...

bobbie@7:30 PM

Your chart only goes through 07/2008 yet you say "recent months."

Do you have anything through 01/2009?

At 2/20/2009 11:19 PM, Blogger bobble said...

anon10:15"Your chart only goes through 07/2008 . . ."

here's the current FRB data thru 12/08.

same trend. down

At 2/20/2009 11:47 PM, Blogger Sam J. West said...

Trend is down but 660 billion is still a positive number, equal to 2007 numbers. Hardly the freeze and disappearance of credit. I hear lenders all day long trying to get more people to borrow.

At 2/21/2009 12:18 AM, Blogger bobble said...

last chart.

total consumer credit is contracting.

really, i'm surprised prof perry isn't telling you this stuff

At 2/21/2009 10:17 AM, Blogger Perry Willis said...

I've looked at all the charts provided in these comments. Most people would have little idea what these charts are actually measuring. I certainly don't. For instance, what does "outstanding credit" mean? The amount people owe, the available credit on people's credit cards? What?

What we need is less jargon and more clarity.

At 2/21/2009 3:14 PM, Blogger SBVOR said...

This comment has been removed by the author.

At 2/21/2009 3:23 PM, Blogger SBVOR said...


Cherry pick much?

When your preferred chart is viewed over a longer time frame, where is the “unprecedented credit crunch” which Paulson lied about?

At 2/21/2009 3:55 PM, Blogger SBVOR said...


1) In Bobble’s chart, there are only 3 data points showing negative growth in consumer credit outstanding. That would be 3 of the last 4 data points.

2) The initial slowdown of the GROWTH in total consumer credit outstanding was clearly a reflection of the fact that media hysteria scared consumers into making fewer retail purchases on their credit cards. More recently, utterly dishonest politicians - one in particular - have scared the consumer even more.

3) As proof, compare this chart (Bobble’s) with this chart (mine). There is a direct correlation between slowing growth in consumer credit outstanding and slowing growth in retail sales.

THERE IS NO CREDIT CRUNCH! We are NOT looking at a refusal to lend! We are looking at a refusal on the part of consumers to make retail purchases on their credit cards - mostly because they have been LIED TO!

At 2/21/2009 4:04 PM, Blogger SBVOR said...

Dr. Perry, as usual, is absolutely correct.

Click here for my analysis - updated just today.

Whether by dishonesty or by incompetence, we’ve been HAD.

This phony baloney “credit crunch” was the excuse used to start us down the road to this enormously destructive “bailout nation”.

Somebody - maybe lots of somebodys - should HANG!

At 2/21/2009 4:56 PM, Blogger marketdoc said...

Wow. Combine this with some improvement in January retail sales data and we might have early signs of an economic recovery. Wait a minute, we haven't been rescued yet by our friends in Washington!

At 2/21/2009 7:53 PM, Blogger David said...

I don't think that "asset backed security" is that relevant.

The bottom line here is to know consumer have access to credit.

The chart present by Dr. Perry answers that question: YES.

Credit if up but less of that credit goes trough ABS (or credit outstanding).

ABS did not exist before late 80's.

At 2/23/2009 6:18 AM, Anonymous Anonymous said...

Is that post supposed to be sarcastic or do I need say that...

...consumer credit doesn't matter a fuck, because so long as producers can't get theirs in order to... oh I don't know, produce and trade to keep civilization up and going, I guess...then we're good and fucked and just might have to risk realizing that we're going through hyper-inflation not just a mere "recession" and certainly not "good times are back yay!" consumer credit expansion?!

I sure as hell hope I don't have to say that, because frankly I've had it UP TO HERE! with all these mainstream ideas telling me everything is okay when I know it isn't!

Anyway, the 50's are not today. We're in a paralell universe that has broken away from the seeming unbroken timeline presented in those stupid charts. Back then, there was still a means of extinguishing debt, called a "gold standard". There hasn't been one since early 70's. Fuck, even Switzerland doesn't back it's franc anymore.

Oh well. Yall have fun in your 10%, nothing-is-wrong consumer credit growth. I'm off to count my gold and silver.

At 2/23/2009 11:52 PM, Blogger Unknown said...

I guess Mr. Anonymous has reached the end of his argument. I find that people that resort to using foul language don't really have much to say. I was following your comments, which up to now were decent, but now I have to toss all of it out.
Please folks, if you can't offer good commentary, then don't bother commenting at all.

At 2/26/2009 11:47 PM, Anonymous Anonymous said...

it's hard to imagine what the banking are facing right now and that chart shows them all.

At 2/27/2009 12:40 AM, Anonymous Anonymous said...

the banks are lending, i work for one (that received tarp money). They are paying the government hundreds of millions in dividends already from the money received. What people forget is that for years, banks were held at gun point to lend to people with bad credit or face the wrath of ACORN and the corrupt they helped to elect. Now banks are back to being able to use their heads and justify saying no, regardless minority or not. We have been lending the whole time...

People forget, lending is associated with risk... positive economy minimizes risk... bad economy magnifies risk... as the saying goes, what goes up, must come down. Over simplified, yes, but still appropriate.


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