Thursday, July 12, 2012

Peak Real Revolving Credit per Capita?

The following chart shows the difference between credit card rates on accounts that pay interest and the interest earned on 3 month certificates of deposit.

Click to enlarge.

That's 12.5%!

Click to enlarge.

Keep saying no!

This is a legendary exponential trend failure. If the exponential trend that had been in place from 1968 through 1999 was still in place, the total would be a whopping $16,400 revolving debt per capita right now. Guess what? We're not going back to the trend line!

How many more epic exponential trend failures do we need to see before most people start to think that maybe, just maybe, it is different this time? I remain a permabear. Sigh.

Source Data:
St. Louis Fed: Credit Card Rate vs. CD Rate
St. Louis Fed: Real Revolving Credit per Capita (May 2012 Dollars)


Mr Slippery said...

Credit expansion is clearly over. Even at 0%, few who are credit worthy want more credit.

Credit is expanding in only two areas as far as I can tell. Student loans and federal government borrowing. However, those are not fully compensating for the general credit destruction.

When the next recession hits, and the federal deficit hits 15% of GDP, this thing may go TILT. Please insert coin.

Look what I found today. The international investment position of the US since 1976 from the BEA.

Here is the chart of the year ending positions.

I can't see anything positive in that chart.

Stagflationary Mark said...

Mr Slippery,

When the next recession hits...

It is common knowledge that there won't be another recession. The Fed has permanently fixed that problem. (The bull market in sarcasm is unstoppable!)

Look what I found today.

I did look! I wonder if there is a way to convert that chart into a syrup. Sigh.

Scott said...

Healthcare benefits make up some of the gap between wage growth and credit growth. But still the gap between ability to repay and credit granted should have been blindingly obvious to the FRB.

Stagflationary Mark said...


But still the gap between ability to repay and credit granted should have been blindingly obvious to the FRB.

Rumor has it that the Fed's Ivory Towers have some
pulchritudinous rose-colored windows.

I tried to do it justice by using a word I had never heard of.