Government Now Holds Over 10% of Consumer Credit

The Federal Reserve released their August 2010 G.19 compilation of consumer credit outstanding with the following headline:

In August, total consumer credit decreased at an annual rate of 1-3/4 percent. Revolving credit decreased at an annual rate of 7-1/4 percent, and nonrevolving credit increased at an annual rate of 1-1/4 percent.

The headline uses seasonally adjusted data.  The majority of revolving credit is from credit cards, while nonrevolving credit includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations.

Much of the decline in Consumer Credit is due to write-offs by the financial institutions.  Overall, consumer credit is down 3% YoY.  Breaking down the components of consumer credit – the only real growth in nonrevolving consumer credit came from the Federal Government.

The Government now holds 15% of nonrevolving credit, and 10% of overall consumer credit.  Regardless how you cut this report, it is hard to spin this as GDP positive.

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