Consumers Cut Back Credit Card Borrowing

Associated Press report dated October 8, 2010

Consumer borrowing fell again in August as consumers cut back on credit card use for the 24th consecutive month, the Federal Reserve said Thursday.

Borrowing by consumers declined by $3.3 billion that month. It was the 18th drop for overall consumer borrowing in the past 19 months.

Americans are borrowing and spend­ing less as they face widespread unem­ployment and uncertainty about their financial futures. The reduced use of credit by consumers is a drag on the recovery, which has yet to show a sus­tained rebound.

Another cause of the decline in credit is banks’ slow recognition that many debts will not be repaid. Banks gave up on $42.5 billion in credit card debt in the first half of 2010, according an analy­sis by the website CardHub.com. The annual rate is more than twice what it was in 2007.

Households are expected to continue cutting back on borrowing as long as incomes stay flat and jobs remain scarce.

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My prediction: No matter what the politicians, economic gurus, and other so-called experts say or do, America is in for a period of slow growth.  Unemployment has been stuck in the 9% plus range since May 2009.  There is nothing on the horizon that indicates a change.  We will just have to learn to live with this reality for the next few years.