In November consumer credit fell by $17.5 billion relative to October representing the largest value decline in US history (falling 3.9% year-over-year).  Since January 2009 credit has been plummeting on an uninterrupted basis.  Not only does this bode poorly for the world’s largest consumer economy, it illustrates the absurdity of politicians and optimists who baselessly profess that we are in the midst of a recovery. 





The last time monthly consumer credit declined by in excess of 2% year-over-year we were emerging from the The Great Depression (July 1944).  As of November 2009 consumer credit had been contracting at a pace in excess of 2% for 6 consecutive months (in excess of 3% for 5 consecutive months).  This trend appears to be accelerating as credit shrank at a pace of 3.9% in November.

At present we are in the midst of a worsening economic depression.

Unemployment is high and rising, foreclosures continue to set new records, bank-lending is contracting, consumer credit is sliding and house prices are falling.  The only thing growing is the deficit, the national debt burden, the size of Government and the circulated money supply. 

Optimists note that the stock market is up and conclude that this must be a function of “the recovery”.  Instead the lofty valuations are the manifestation of concerted stimulus efforts and free Federal Reserve money, not a reflection of improving fundamentals.  At some point (likely soon) the equity markets will be forced to abandon the fictional narrative of recovery and refocus on the reality of an eroding economy.  I expect the DOW to have an 8 in front of it at some point during 2010.