daytrade diaries... december 11&12, page-25

http://au.news.yahoo.com/thewest/business/a/-/world/6579178/thrifty-american-housholds-reduce-national-debt/

Thrifty American housholds reduce national debt
GARETH COSTA, The West Australian December 12, 2009, 2:48 pm

US household debt fell at a faster annualised rate in the September quarter than the increase at the peak of the credit boom in 2005.

Total national debt also fell by $US275 billion to $52.6 trillion ($57.5 trillion) according to the latest data from the Federal Reserve Board.

Once the fuel driving global consumption demand, the financial crisis has forced US consumers to save more and spend less, with the result that they reduced debt by $351 billion in the three months to September.

This is in spite of the $500 billion the Fed has pumped into the US banking system since July.

Instead of lending into the US economy, Fed data shows that of a total increase in net US bank liabilities of $US689 billion, $US500 billion of this was with foreign banks.

This number goes a long way to indicating the amount of money flowing from the US in the so called "anything but the US dollar" carry trade that has driven equity markets and commodity price rallies over the past six months.

In the past two weeks the US M1 money supply multiplier which measures the onward lending impact of the Fed "money printing" fell to 0.811 times, a 19 per cent decline since July.

Another worrying statistic was the non-farm, small business debt which declined by $368 billion, more than the total increase for the whole of 2005.

This data is the background to Fed Governor Ben Bernanke's comment this week that the US economy faces "formidable headwinds," because increasing national debt has been a critical component of US and global trade demand.

In 2006 the increase in US household debt peaked at $US1.176 trillion before starting to increase at a slower rate before actually starting to decline a year ago.

Total US debt peaked in the first quarter of this year, but the deleveraging has only been staved off by sharp increase in government borrowing to try and stimulate the economy.

US consumer's accounted for over $US9 trillion, or about 20 per cent of global demand at the peak in 2008, and while all eyes are on China to pick up the slack, it only consumes around $US1.2 trillion of output.