Consumers Borrowing More? Not Good News

Personal earnings are flat.

Despite their lack of earnings growth, consumers are borrowing more, as the Federal Reserve reported Monday. Credit card borrowing alone jumped 8.5% in a single month, November 2011.

To finance these new debts, consumers are cutting back their saving, from 5% of income in 2010 to about 3.5% in 2011.

Some put together these facts and see rising consumer confidence. To me it looks a lot more like hard-pressed Americans treating themselves to a slightly less dismal Christmas in 2011 by putting the costs on plastic.

Which (if true) would mean that the decline in household indebtedness since 2008 is about to touch bottom—still at levels well above those that looked scarily high as recently as 1995.

One more thought: You might wonder, who is making all these credit card purchases? If what we've got here is upper-income Americans accelerating their spending, even as credit remains unavailable to lower-income Americans, then the story may really be another example of our very selective recovery, with good times returning for some even as hard times linger for many, many more.