Consumers cut debt for 5th straight month

[Midpack]

Good news as far as I'm concerned. Heard someone on CNBC earlier this week say 'this isn't a recession, it's a reset.' Even though it means the recovery will be much slower, hopefully we won't get so far ahead of ourselves again and face another meltdown like the one just past (fingers crossed).

Consumers cut debt for 5th straight month | Comcast.net

[FUEGO]

I wonder how this statement can be true:

"The Fed says Americans cut their outstanding consumer debt by $10.3 billion, or 4.9 percent, to $2.5 trillion in June"

$10 billion is close to 0.49% of $2.5 trillion, but nowhere near 4.9%. Simple math error or am I missing something?

[Midpack]

Quote:

Originally Posted by FUEGO I wonder how this statement can be true: "The Fed says Americans cut their outstanding consumer debt by $10.3 billion, or 4.9 percent, to $2.5 trillion in June" $10 billion is close to 0.49% of $2.5 trillion, but nowhere near 4.9%. Simple math error or am I missing something?

If they cut their debt by $10.3B in June to $2.5T, that would be a monthly drop of 0.41% or an annual rate of about 4.9%...

Quote:

Outstanding U.S. consumer debt fell by $10.3 billion, or 4.9 percent at an annual rate, to $2.5 trillion, the Federal Reserve said. That's a much steeper cut than the $4.7 billion analysts expected, according to Thomson Reuters.

[FUEGO]

Quote:

Originally Posted by Midpack If they cut their debt by $10.3B in June to $2.5T, that would be a monthly drop of 0.41% or an annual rate of about 4.9%...

Gotcha. Missed the "at an annual rate" part. That is a steep drop. Only 20 years of that and the nation would be debt free!

Heh, I just figured out why I missed the "at an annual rate" part. It wasn't there when I read the article the first time. They changed the friggin article after I pointed out the error! I copy/pasted the quote in my post above straight from the article. At least they caught their mistake. For a minute I thought I was going crazy...

If debt was reduced by 5% on an annual basis and it also says savings increased 5%, then that means some serious reductions in consumer spending (assuming relatively flat incomes).

[missionfinder]

At the current rate it would be a lot faster than 20 years, because as one's debt load decreases if one continues to throw the same amount of money at the debt then each year they would hit a higher percentage:

Using round numbers, $100K debt and 5% ($5000):

Year 1: $100K - $5K = $95K or 5%
Year 2: $95K - $5K = $90K or 5.26%
Year 3: $90K - $5K = $85K or 5.88%
Year 4: $85K - $5K = $80K or 6.25%
and so on...

[ERD50]

Quote:

Originally Posted by Midpack Good news as far as I'm concerned. Heard someone on CNBC earlier this week say 'this isn't a recession, it's a reset.' Even though it means the recovery will be much slower, hopefully we won't get so far ahead of ourselves again and face another meltdown like the one just past (fingers crossed).

I agree with your comment.

It seems obvious to me, if we don't actually 'reset', we are just jumping back into another bubble. So it will be painful. The bubble was the problem, and the recession is just the result of the problem. But people see the recession as "the problem".

I think a long, gentle sustained 'reset' is the fix.

-ERD50