The news:
Consumer borrowing dropped in February, after increasing for the first time in a year during the previous month, according to a government report released Wednesday.
Total consumer credit fell a seasonally adjusted $11.5 billion, at an annual rate of 5.6%, to $2.448 trillion in February, the Federal Reserve reported.
Economists predicted a decline in total borrowing of $0.7 billion in February, according to a consensus estimate from Briefing.com.
“February’s decline reflects on the still dire state of the economy,” said Yasmine Kamaruddin, an economic analyst at Wells Fargo.
Yeah, no kidding, Yasmine. You figure that out all by yourself?
Anyways, not to get down on Yasmine – or any of the other “experts” who found this drop to be “unexpected” – we’re still in a bad way. And the January gain was just a mirage brought about by some screwy government action on student loans which made it appear that consumer credit grew in January when it really didn’t. Essentially, we’re now 13 months in to consumer credit decline.
In the long run, this is very healthy – the American people are de-leveraging and learning that they don’t really need instant gratification. Frills can wait, as it were. In the short run, however, this bodes ill for the Keynsian economic model we’re following. All these bazillions of bucks of government printing, borrowing and spending are supposed to ignite the economy – but it stubbornly refuses to catch fire.
I think its because we got badly burned in the housing bubble and we’d rather not torch up again. Slow and steady does get the job done – which means that we’ll only be able to spend money as we make it. The problem is that nothing in Obama’s policies encourage wealth creation – there is nothing in there to really encourage someone to open a mine, start a farm, build a factory. Until we start doing that, we’re just spinning our wheels – at best – or digging our economic grave – at worst (and I think its “at worst” – our debt is crushing us).
Going to be a long, hard road out of this – made harder by Obama and his Democrats. The good news is that they might wipe themselves out so bad that we need not trouble with them for a generation. And that’s a good thing because it will take us that long to clear up the mess.
HAT TIP: Mish’s
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