Q3 2009 private sector credit collapsed at – $1.81 Trillion annual rate.

Deflation is on a firm path in the US economy despite all of the Fed’s efforts to reflate.

The just released privately owned Federal Reserve’s Flow of Funds report for December 10th, 2009  shows that the third quarter of 2009 continued to witness the greatest credit collapse of all time (http://www.federalreserve.gov/releases/z1/current/z1r-3.pdf).

Open Market Paper: Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $241.2 billion. (See line 2.)

Banks lending: Credit markets [collapsed] at the astonishing pace of $801.7 billion per year, their biggest cutback of all time (line 7).

Nonbank lending: (line 8.0) pulled out at the annual rate of $271.3 billion, also one of the worst on record.

Mortgage lenders: (line 9) pulled out  at an annual rate of $547.3 billion

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 $133.3 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 $81.6, the worst on record.

The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1481.2 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 $275.6 billion.

Private sector credit fell at an astonishing $1.8098 Trillion.

Also, after the revisions and updates Q2 2009 private credit collapse was actually -$2.3159 Trillion annual rate, which is worse than -$2.2408 Trillion initially reported.


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