The European Central Bank extended its ‘emergency support’ operation to banks, rates at 1.00% for another year, the 17th consecutive month as global unemployment is estimated to have increased by 30 million since 2007. How long is an emergency and what about ‘new normal’? Looming government spending cuts in the UK, banks and building societies have had to write off 70% more consumer debt in Q2 compared to the previous one; credit cards £2.1B out of a total £3.47B, both new records. Not surprising then that lending criteria have tightened, net unsecured loans £173M in July versus closer to £2B in 2003-2005’s boom, 48% of credit card applications turned down last year. Net mortgage lending £86M in July, as low as it got in 2009 and well below 2007’s peak at £10.5B. Note that outstanding household debt at £1,456B, or £23,100 per person, is the highest among G7 countries. Lending to companies shrank again in July, the eleventh month in a row, as non-financial corporations paid back £2.0B cutting net debt by 3.1% Y/Y; some may be resorting to the capital markets and the lucky are hoarding cash. Irish PM Cowen says the immediate windup of Anglo Irish Bank could cost €70B.
Revised data show US households are saving a greater part of their disposable income, on average close to 6%, as they try to repair balance sheets, prospects uncertain as unemployment remains at 9.6%; record low mortgage rates are helping, 30-year fixed rate a record low 4.32%.
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