Courtesy of Michael Panzner of Financial Armageddon
In "Consumer Credit in U.S. Rose $12 Billion in July, Fed Says," the San Francisco Chronicle details the latest report on what Americans are doing with other people’s money:
Consumer borrowing in the U.S. rose by the most in more than three years in July, led by a gain in non-revolving credit that includes student loans.
Credit increased $12 billion after a revised $11.3 billion rise in June, the Federal Reserve said today in Washington. Economists projected a $6 billion gain, according to the median forecast in a Bloomberg News survey. The rise in non-revolving loans was the most since November 2001.
Revolving credit showed the biggest decrease in six months, indicating Americans may be cutting back on non-essential items as limited job and wage growth depresses consumer confidence. Employment and income gains may be required to help spark the household spending and the recovery.
Borrowing through student loans "continues to rise with the increasing costs of college tuition," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before today’s report. "We are watching for signs the consumer may be relying more on debt to see them through as incomes are becoming pinched."
Non-revolving debt, including educational loans and loans for autos and mobile homes, rose by $15.4 billion in July, and revolving debt, which includes credit cards, fell by $3.4 billion. The report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.
School Loans
The total increase in credit reflected a $15.6 billion non- seasonally adjusted rise, to $385.7 billion, in the federal government category of borrowing, which includes school loans.
In fact, if you compare education-related borrowing to total borrowing, it throws up (no pun intended) a dizzying divergence. While consumer credit overall has drifted lower since the financial crisis unfolded (as it should), the amount of school loans outstanding has rocketed higher.
I wonder: does it really make sense for young people to be taking on extraordinary debt loads to finance an effort that no longer offers good value for money at a time when the longer-term outlook remains decidedly shaky — at best?
Sounds like another disaster in the making to me.
