The Debt Free Blog - Guide To A Debt Free Lifestyle » News http://thedebtfreeblog.com Thu, 22 Oct 2009 19:27:28 +0000 en hourly 1 http://wordpress.org/?v=3.0.1 Fed: consumers cut debt by record $21.6B in July http://thedebtfreeblog.com/127 http://thedebtfreeblog.com/127#comments Tue, 08 Sep 2009 20:39:13 +0000 admin http://thedebtfreeblog.com/?p=127 WASHINGTON – Consumers slashed their borrowing in July by the largest amount on record as job losses and uncertainty about the economic recovery prompted Americans to rein in their debt.
Economists expect consumers will continue to spend less, save more and trim debt to get household finances decimated by the recession into better shape. However, such action is a recipe for a lethargic revival, as consumer spending accounts for 70 percent of economic activity.
The Federal Reserve reported Tuesday that consumers ratcheted back their credit by a larger-than-anticipated $21.6 billion from June, the most on records dating to 1943. Economists expected credit to drop by $4 billion.
Wary consumers and hard-to-get credit both factor into the scaled-back borrowing. But economists are split on which force — lack of demand by consumers or lack of supply from banks — is having the bigger influence.
“It’s really a tug of war,” said Mark Williams, professor of finance and economics at Boston University and a former Fed bank examiner. “It’s true that consumers are being more responsible, saying ‘I don’t really need that extra credit card,’ but it is more related to banks clamping down on lending.”

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