1/9/2013
By David Urani

Consumer credit numbers are out for November from the Federal Reserve, and for the month total outstanding credit increased by $16.0 billion, well above the $13.2 billion consensus. $15.2 billion of that was non-revolving credit (student and auto loans) and just $817 million was revolving (credit cards).  That puts the total amount of consumer credit at $2.8 trillion.

$5 billion of the monthly increase came from the federal government which takes me to an interesting point. From the end of 2011 through November, total consumer credit increased by $120 billion while $104 billion of that increase came from the federal government. That means 87% of the entire increase in consumer credit in 2012 (through November) came from the government! And as we know, the vast majority of the government's credit is student loans. As you can see, that figure has exploded five times over ever since President Obama took office.

Here's where it gets interesting, student loan debt is now just over $1 trillion in total, more than half of which is held by the government and growing. But student loans aren't doing so hot after leaving college with $28,700 of student loan debt. Whether they ended up graduating or dropped out, they are facing a difficult economy in which too many are either unemployed or under-employed based on their qualifications.  In the third quarter of 2012, seriously delinquent student loans (90+ days) spiked up from 8.9% of the total to 11% according to the Federal Reserve Bank of New York. 

So we've got a growing debt bubble of ill-advised loans made to people who can't afford it. Sounds like something Wall Street did not too long ago doesn't it?

David Urani
Wall Street Strategies