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Tuesday, October 07, 2008


consumer credit implodes

per bloomberg

Borrowing by U.S. consumers unexpectedly fell in August by the most on record as banks shut off access to loans, a report from the Federal Reserve showed.

Consumer credit fell by $7.9 billion, the most since statistics began in 1943, to $2.58 trillion, the Fed said today in Washington. In July, credit rose by $5.2 billion, previously reported as a $4.6 billion gain. The Fed's report doesn't cover borrowing secured by real estate.

Consumer spending, the biggest part of the economy, is likely to keep faltering as banks hoard cash, job losses mount and property values drop. The decline in borrowing underscores why Fed policy makers today announced they will create a special fund to purchase commercial paper in a bid to open the flow of credit to the nation's businesses.

``This is what happens when consumers are fearful and banks tighten lending standards to all applicants,'' said Richard Yamarone, chief economist at Argus Research in New York. ``No one borrows, no one lends. It's a classic example of a frozen credit channel.''

here's the saint louis fed chart, which isn't updated yet, reflecting monthly percent change.

UPDATE: updated graph.


in case you haven't heard:

the book "dow 36,000" is being re-released as "dow 3,600".

today's best jollies:

"don't short me, bro", and,
(re: the markets) - "you can't outrun an avalanche."

man, i gotta get away from my computer and get a life. feels like a pub night!

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