Whitney Bear Continues To Sound Alarms About 2010
CNBC:
Consumers in Trouble, U.S. 'Out of Bullets': Whitney
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.
...Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.
Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.
With consumer spending making up about 70 percent of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow could put a severe crimp in future growth...
For Perspective, Here is a Graph of Consumer Credit Whitney is Referring To:
Graph1. TOTALSL
Graph Type: Line Bar Pie Scatter
Recession Bars: On Off
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Total Consumer Credit Outstanding, Monthly, End of Period, Billions of Dollars, Seasonally Adjusted
Units:
Billions of Dollars Change, Billions of Dollars Change from Year Ago, Billions of Dollars Percent Change Percent Change from Year Ago Compounded Annual Rate of Change Continuously Compounded Rate of Change Continuously Compounded Annual Rate of Change Index (Scale value to 100 for chosen period)
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2007-12-012001-03-011990-07-011981-07-011980-01-011973-11-011969-12-011960-04-011957-08-011953-07-011948-11-011945-02-01 or Trough
2009-07-012001-11-011991-03-011982-11-011980-07-011975-03-011970-11-011961-02-011958-04-011954-05-011949-10-011945-10-01
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2009-11-062009-10-072009-09-082009-08-072009-07-082009-06-052009-05-072009-04-072009-03-062009-02-062009-01-082008-12-052008-11-072008-10-072008-09-082008-08-072008-07-082008-06-062008-05-072008-04-072008-03-072008-02-072008-01-082007-12-072007-11-072007-10-052007-09-102007-08-072007-07-092007-06-072007-05-072007-04-062007-03-072007-02-072007-01-082006-12-072006-11-072006-10-062006-09-082006-08-072006-07-102006-06-072006-05-052006-04-072006-03-072006-02-072006-01-092005-12-072005-11-072005-10-072005-09-082005-08-052005-07-082005-06-072005-05-062005-04-072005-03-072005-02-072005-01-072004-12-072004-11-052004-10-072004-09-082004-08-062004-07-082004-06-072004-05-072004-04-072004-03-052004-02-062004-01-082003-12-052003-11-072003-10-072003-09-082003-08-072003-07-082003-06-062003-05-072003-04-072003-03-072003-02-072003-01-082002-12-062002-11-072002-10-072002-09-092002-08-072002-07-082002-06-072002-05-072002-04-052002-03-072002-02-072002-01-082001-12-072001-11-072001-10-052001-09-102001-08-072001-07-092001-06-072001-05-072001-04-062001-03-072001-02-072001-01-082000-12-072000-11-072000-10-062000-09-082000-08-072000-07-102000-06-072000-05-052000-04-072000-03-072000-02-072000-01-071999-12-071999-11-051999-10-071999-09-081999-08-061999-07-081999-06-071999-05-071999-04-071999-03-051999-02-051999-01-081998-12-071998-11-061998-10-071998-09-081998-08-071998-07-081998-06-051998-05-071998-04-071998-03-061998-02-061998-01-081997-12-051997-11-071997-10-071997-09-081997-08-071997-07-081997-06-061997-05-071997-04-071997-03-071997-02-071997-01-081996-12-06
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Here's my take-away: Consumer credit almost always bottoms out after a recession is over, so Whitney's concerns may be a little overdone in this regard, as the rate of decline is already slowing, and could begin turning back up over the next few quarters based on current trends.
Of note: The last time we saw outright negative YoY % Change in Consumer Credit was after the recession of 2H 1990-1Q 91. That was also this country's only other Post WWII Banking Crisis (S&L Crisis).
The previous post-WWII record holding YoY decline in consumer credit was 1.9% in 1991. The current decline in consumer credit is a post-WWII record 3.6%, which is actually still a far cry from the declines seen during the dismantling of WWII and during the Great Depression.
Consumers in Trouble, U.S. 'Out of Bullets': Whitney
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.
...Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.
Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.
With consumer spending making up about 70 percent of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow could put a severe crimp in future growth...
For Perspective, Here is a Graph of Consumer Credit Whitney is Referring To:
Graph1. TOTALSL
Graph Type: Line Bar Pie Scatter
Recession Bars: On Off
Log Scale: Left Right
Size: (W) (H) Preserve Ratio
Quick Size: Medium Large X-Large
Image Background Color
Graph Background Color
Text Color
Total Consumer Credit Outstanding, Monthly, End of Period, Billions of Dollars, Seasonally Adjusted
Units:
Billions of Dollars Change, Billions of Dollars Change from Year Ago, Billions of Dollars Percent Change Percent Change from Year Ago Compounded Annual Rate of Change Continuously Compounded Rate of Change Continuously Compounded Annual Rate of Change Index (Scale value to 100 for chosen period)
Select a US Recession Peak
2007-12-012001-03-011990-07-011981-07-011980-01-011973-11-011969-12-011960-04-011957-08-011953-07-011948-11-011945-02-01 or Trough
2009-07-012001-11-011991-03-011982-11-011980-07-011975-03-011970-11-011961-02-011958-04-011954-05-011949-10-011945-10-01
Or Enter an Obs Date
Display integer periods instead of dates (e.g. ...,-1,0,1,...) with the value scaled to 100 at period 0.
Integer Period Range: to
Copy to All Series
Copied Integer Periods
Min, Max, and Avg Series:
Do not include this series in (min, max, avg) calculations.
Include this series in (min, max, avg) calculations.
Include this series in (min, max, avg) calculations, but do not display this series.
Scale:
Left Right
Line Style:
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Obs Quick Range: Custom 5yrs 10yrs Max
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2009-11-062009-10-072009-09-082009-08-072009-07-082009-06-052009-05-072009-04-072009-03-062009-02-062009-01-082008-12-052008-11-072008-10-072008-09-082008-08-072008-07-082008-06-062008-05-072008-04-072008-03-072008-02-072008-01-082007-12-072007-11-072007-10-052007-09-102007-08-072007-07-092007-06-072007-05-072007-04-062007-03-072007-02-072007-01-082006-12-072006-11-072006-10-062006-09-082006-08-072006-07-102006-06-072006-05-052006-04-072006-03-072006-02-072006-01-092005-12-072005-11-072005-10-072005-09-082005-08-052005-07-082005-06-072005-05-062005-04-072005-03-072005-02-072005-01-072004-12-072004-11-052004-10-072004-09-082004-08-062004-07-082004-06-072004-05-072004-04-072004-03-052004-02-062004-01-082003-12-052003-11-072003-10-072003-09-082003-08-072003-07-082003-06-062003-05-072003-04-072003-03-072003-02-072003-01-082002-12-062002-11-072002-10-072002-09-092002-08-072002-07-082002-06-072002-05-072002-04-052002-03-072002-02-072002-01-082001-12-072001-11-072001-10-052001-09-102001-08-072001-07-092001-06-072001-05-072001-04-062001-03-072001-02-072001-01-082000-12-072000-11-072000-10-062000-09-082000-08-072000-07-102000-06-072000-05-052000-04-072000-03-072000-02-072000-01-071999-12-071999-11-051999-10-071999-09-081999-08-061999-07-081999-06-071999-05-071999-04-071999-03-051999-02-051999-01-081998-12-071998-11-061998-10-071998-09-081998-08-071998-07-081998-06-051998-05-071998-04-071998-03-061998-02-061998-01-081997-12-051997-11-071997-10-071997-09-081997-08-071997-07-081997-06-061997-05-071997-04-071997-03-071997-02-071997-01-081996-12-06
Units:
Select a US Recession Peak or Trough
Or Enter an Obs Date
Display integer periods instead of dates (e.g. ...,-1,0,1,...) with the value scaled to 100 at period 0.
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Here's my take-away: Consumer credit almost always bottoms out after a recession is over, so Whitney's concerns may be a little overdone in this regard, as the rate of decline is already slowing, and could begin turning back up over the next few quarters based on current trends.
Of note: The last time we saw outright negative YoY % Change in Consumer Credit was after the recession of 2H 1990-1Q 91. That was also this country's only other Post WWII Banking Crisis (S&L Crisis).
The previous post-WWII record holding YoY decline in consumer credit was 1.9% in 1991. The current decline in consumer credit is a post-WWII record 3.6%, which is actually still a far cry from the declines seen during the dismantling of WWII and during the Great Depression.