Skip to main content

View Diary: Student Loans: a bubble waiting to burst (214 comments)

Comment Preferences

  •  Auto and student loans comprise most of... (20+ / 0-)

    ...the consumer credit made available to the 99% these days. Only nominal increases in revolving/installment credit lines over the past couple of years. And, that was after a two- to three-year period when banks stripped approx. 40% of available consumer revolving credit from the public. (A very underpublicized fact.) This had the desired effect of pushing the typical consumer's CREDIT UTILIZATION RATE way up (i.e.--think: the amount of credit still open/unused and/or on one's credit card/line); and, that's a major metric used in determining credit scores.

    Effectively, this lowered the credit scores of a significant portion of the buying public, in addition to dramatically slowing down the velocity of money/credit.

    Summing it all up, banks were not only NOT extending credit since the Recession commenced in Dec. 2007--and the government knew this despite their public protestations to the contrary--lenders were, quite dramatically, doing the exact opposite (while also using cheap, taxpayer-backstopped money for other purposes).

    Here's THIS from Zero Hedge in the past day...

    ...the Fed’s Consumer Credit report, a stalwart indicator of how much consumers are borrowing to prop up the economy, shed more light on our strung-out heroes. Not seasonally adjusted, consumer credit increased by $10.3 billion in October, the third month in a row of increases, raising hopes in some quarters that the unemployed, the underemployed, and those working for wages that haven’t kept up with inflation would somehow summersault over their income hole by borrowing from the future—a strategy that has been a key driver of economic growth in the US, and that has hit a wall during the Great Recession.

    But credit cards and other forms of revolving credit edged up only $1.4 billion, after a swoon in September. What did jump was non-revolving credit. By $8.9 billion. Alas, almost $7 billion of it was student loan debt held by the government. Consumers aren’t splurging. They’re borrowing to pay for essentials. And for education...

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Sun Dec 09, 2012 at 05:53:48 AM PST

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site