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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Record drop in consumer installment debt

Posted by WARREN MOSLER on September 9th, 2009


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Yes, consumer installment debt tends to fall with rising federal deficits.

The income and savings added by the higher deficits helps sustain consumption without as much consumer debt as would otherwise be necessary.


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6 Responses to “Record drop in consumer installment debt”

  1. Curious Says:

    Total consumer debt is about 2.5 trillion, so 21 billion drop is less than 1 percent drop.

    If I owed $100 July 1st and $99 August 1st, is that much of a difference?

    Can someone explain why is this worth even reporting?

    Reply

    Matt Franko Reply:

    Curious,
    I have a hunch it may have been student loans, as autos seemed to have flattened out over the summer. Will try to find further details if available.

    Reply

  2. warren mosler Says:

    the change is quite a bit for a one month period, and potentially represents a drop in consumption, gdp, and employment for the quarter.

    Reply

  3. CJ Maloney Says:

    This drop in consumer spending is a good thing. After a decade long orgy of reckless spending, it is high time for the over-indebted American family to learn to live like adults again. Granted, as fast as we are paying down debt the politicians are foisting more of it on our backs, but God created a predator for every creature, and the politician is ours.

    Reply

    Matt Franko Reply:

    The facts do not support your statement here. Resp,

    Reply

  4. Warren Mosler Says:

    and the point of it all is to be able to consume what we can produce.

    and if the rest of the world wants to send us stuff in return for our financial assets, all the better.

    right now we are unable to facilitate the consumption of our own production, and as a result unemployment has climbed to devastating levels.

    Reply

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