Consumer Debt

The Federal Reserve reported some good news this month; consumer debt is declining. Suspicious? I am and maybe for no good reason, but just the same, I thought I would do a little digging into the numbers to see what I can see. If consumer debt is declining I want to know why because I still know too many who are struggling because of unemployment and underemployment, and they are not in position to pay any debt down anytime soon.

I found a great article about this very issue. The article states the following facts about consumer debt:

• U.S. consumer debt is declining, though at different rates among different groups of borrowers.
• Defaults or bank write-offs account for most of the drop in debt over the past two years.
• Borrowers with weak credit scores paid down auto loans in 2010, while those with stronger scores increased borrowing.
• A similar pattern holds for mortgages in 2011.

The drop in consumer debt could mean any number of things, but it is premature to celebrate it as "good news." Moody's has a good analysis of what these numbers mean according to their views. They go into great detail, and they have published their views in an article that you can access HERE. Read it and see if you agree with their assessment. Blessings!