DISQUS

Credit Writedowns: Consumer credit down, but does it show deleveraging?

  • Pangea Joel · 1 month ago
    Wouldn't the most appropriate way to determine whether this was supportive of a recovery from a consumer standpoint via looking at the ratio of credit to personal income?

    Furthermore, since we live in a class-based society wouldn't it be important to look at the levels of credit compared to income for various income quintiles, whose disposable income levels will vary widely even though an aggregate or average number will disguise this?
  • Pangea Joel · 1 month ago
    Wouldn't the most appropriate way to determine whether this was supportive of a recovery from a consumer standpoint via looking at the ratio of credit to personal income?

    Furthermore, since we live in a class-based society wouldn't it be important to look at the levels of credit compared to income for various income quintiles, whose disposable income levels will vary widely even though an aggregate or average number will disguise this?
  • Edward Harrison · 1 month ago
    credit to personal income would do about the same thing, yes. But, Debt to GDP is a more generally recognized statistic.

    Getting credit by class would indeed be revealing, but that data is not available.
  • Pangea Joel · 1 month ago
    Hours worked has declined by ~5% annually, and presumably that translates into lower income, but GDP doesn't reflect that. in fact, GDP could still be positive while hours and income decline, ie higher productivity.

    Isn't it possible to get credit card credit balances related to income?
    And if not, couldn't we use concrete proxies? Say high-end retail store credit cards or AmEx for wealthy and gas cards
    and home mortgage debt related to income?
    For housing, it should be easy to get data for mortgage debt amounts for different price classes of homes, which we could infer roughly correlates to income levels.
    And maybe similarly for car notes.
  • ozajh · 1 month ago
    Shouldn't that be "revolving credit lines (credit card lines) are being cut"?
  • Edward Harrison · 1 month ago
    yes. I will change that.
  • Terry · 1 month ago
    "...it is still not clear to me that the scale of deleveraging is great enough to induce a recessionary relapse."

    Maybe so, but how does a lack of deleveraging help sustain a healthy economic growth? I certainly don't consider a debt-driven recovery to be "healthy" in any sense of the term, just the promise of another financial collapse down the road.
  • Edward Harrison · 1 month ago
    key word 'healthy.' I certainly don't see continued high leverage as healthy. It does sow the seeds for more pain to come.
  • RHondo · 1 month ago
    You could make a case for the NSA non-revolving credit increase been the result of CFC. Besides debt/gdp in the short term is going to be influenced more by gdp than debt. Individuals can't deleverage that fast......only to the extent they realign consumption, income and debt reduction. A very slow process at first.
  • randolphkinney · 1 month ago
    How does defaults and foreclosure figure into debt to GDP and deleveraging?

    Home prices have fallen and a significant number of homes have been taken by the banks. How does the debt "forgiveness" through the foreclosure process get accounted for in consumer debt? Or is the consumer debt level partially offset when the home is sold by the bank to a new consumer who then takes a new mortgage?

    What about mortgage modifications?

    What about deed in lieu of and renting back to the consumer?