Q2 2009 private sector credit collapsed at – $2.2408 Trillion annual rate.

Deflation is accelerating in US economy despite all the Fed’s efforts to reflate.

The Q2 2009 privately owned Federal Reserve’s Flow of Funds report for September 17th, 2009  shows that the second quarter of 2009 brought the greatest credit collapse of all time (http://www.federalreserve.gov/releases/z1/20090917/z1r-3.zip).



Open Market Paper: Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $735.2 billion. (See line 2.)

Banks lending: Credit markets [collapsed] at the astonishing pace of $931.3 billion per year, their biggest cutback of all time (line 7).

Nonbank lending: (line 8.0) pulled out at the annual rate of $398.7 billion, also one of the worst on record.

Mortgage lenders: (line 9) pulled out for a third straight month at an annual rate of – $239.5 billion. (Their worst on record was in the prior quarter.)

Corporations were able to buck the trend somewhat (with government backing of course) and on the tide of rising stock market and economic expectations of a “recovery” were able to pull in from investors some $230.7 billion dollars to stay afloat for now (see line 6).

Consumers: (line 10) were shoved out of the market for credit at the annual pace of $166.8 billion, the worst on record.

The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1896.4 billion of the credit available — and leaving LESS than nothing for the private sector as a whole.

Overall total credit in the economy shrank at an unprecedented annual rate of $241.1 billion.

Private sector credit fell at an astonishing $2.2408 Trillion.

At the same time total household wealth is down by – $11020.9 billion or – $11.0209 Trillion  from end of October of 2007 when the recession began (see Fed Flow of Funds, Balance Sheets report  http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf). It is up slightly from the March 2009 lows due to stock market rally.


Deflation it is.



  1. Posted September 18, 2009 at 11:30 am | Permalink

    I wouldn’t call the latest news on personal debt a “credit collapse”. I would call it good news for those who can get out from under their load of debt.

    • Posted September 26, 2009 at 1:22 am | Permalink

      Credit collapse is a good news. It furthers deflation.

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  1. […] credit collapse was actually -$2315.9 Trillion annual rate, which is worse than -$2.2408 Trillion initially reported. This entry was written by ndainfo, posted on December 10, 2009 at 7:50 pm, filed under […]

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