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August 9th, 2009 at 9:44 am
It is not clear from the presentation that the decline in revolving credit is totally explained by a lack of demand for credit. The data on the length of unemployment and the recent consumer confidence data might suggest that it is plausible, but is not proof. I have no data, but I have anecdotal evidence: The outrageous lending "standards" of the past few years that led us to this crisis have been tossed out, and replaced by the old fashioned banker’s rule: Only lend to those who do not need it. We now have the magic, but completely arbitrary and often non-sensical credit score in charge of lending decisions, and one tough problem is that no prior credit = no credit score = no credit. Period. It seems quite clear at this level that credit flow is not free, and a decline in revolving credit may well have a supply component.