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For the first month since January of 1998, American consumers in August paid off more debt than they took on, according to a report from the Federal Reserve. If the trend continues, the economy will almost certainly contract -- something it is probably doing now anyway, given the credit crisis. In the long run, however, consumers will be healthier financially. They have been vastly overleveraged; the saving rate is close to zero. Seasonally-adjusted consumer debt, including credit cards and other unsecured debts, fell by 3.7 percent in August. Nonrevolving credit -- such as auto loans, personal and student loans --- plunged by 5.4 percent, the largest decline in 16 years.
For the first month since January of 1998, American consumers in August paid off more debt than they took on, according to a report from the Federal Reserve. If the trend continues, the economy will almost certainly contract -- something it is probably doing now anyway, given the credit crisis. In the long run, however, consumers will be healthier financially. They have been vastly overleveraged; the saving rate is close to zero. Seasonally-adjusted consumer debt, including credit cards and other unsecured debts, fell by 3.7 percent in August. Nonrevolving credit -- such as auto loans, personal and student loans --- plunged by 5.4 percent, the largest decline in 16 years.