Consumer Tapped Out

The consumer is tapped out and has been for some time. Without the real estate fiasco, we would have been in trouble a long time ago. The 2001-2003 tech bubble collapse would have been much worse without the real estate bubble to paper over the problems. Consumer credit (excluding mortgages) has been growing at a steadily slower rate since the mid-90's. So either folks are wealthier or they have been increasingly unable or unwilling to take on additional debt. Look for yourself, these numbers are from the Federal Reserve, so they must be true!

By looking at this graph, you would think that consumers have been retrenching. But note that debt has been increasing, just increasing at a slower rate. Could that be because for the past fifteen years consumers have been finding it increasing difficult to make "ends meet"? Is this because it is not possible for the average US consumer to maintain their current lifestyles? Is there another "piggy bank" or ATM, like US housing equity, to borrow against to maintain that lifestyle? Nothing is impossible, but this graph implies that it will not be possible, at least not much longer. Watch out if the RATE turns negative and STAYS negative. This will be serious trouble for the reflationist camp.