Good on ya! Consumers continue to pay off debt

thumbnailby Hans Eisenbeis

WHAT’S HAPPENING

  • Declines in consumer debt during the Great Recession (and ersatz recovery) have been accelerated by foreclosures because a mortgage is a big piece of debt that no longer burdens an evicted homeowner. But a November 2010 report by the Fed shows that unsecured, revolving credit debt — that is, primarily credit card debt — continues to decline as well (CalculatedRiskBlog.com, 8 November 2010).
  • According to the Fed, the third quarter of 2010 saw the first decrease in non-mortgage debt since 2000.
  • Analysts say that this is likely the result of both a tightening of credit supply and demand, and American consumers’ aggressive new strategy to pay off outstanding debt.

WHAT THIS MEANS TO BUSINESS

  • Still looking for evidence of the New Normal? American consumers have been scared straight, and they’ll continue to Get RealSM about financial responsibility. This will be great for the long-term health of the economy.

RESOURCES

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