The Credit-less Recovery

This was posted yesterday @ 24/7 Wall Street.

The economic recovery can only carry so much weight before it gets bogged down. It already faces unemployment that is 10% and may rise into next year. In 2011, personal and business taxes are scheduled to rise which should cut into spending.

Now, The Federal Reserve reports that consumer credit is still contracting and fell $3.5 billion in October.

It is hard to make a case that the economy can stage an even modest recovery if the use of credit, especially by consumers, continues to contract. Holiday spending so far has been slightly above last year, according to a number of private research firms and retail associations. That may not hold as shoppers hit the critical last two weeks of activity before Christmas. Buyers visiting malls and stores may begin to look at credit card balances and ask themselves if they can pay them down next year. That is if their lending institutions have not already capped what they can spend on the cards.

There will not be a “credit-less” recovery. That is too much of what Ben Bernanke calles a “headwind.”

Link:  http://247wallst.com/2009/12/08/the-jobless-recovery-is-joined-by-a-credit-less-one/#more-55296