>> This answers my question from the other day, how does a consumer
>> economy recover with no consumer? Credit.
>
> Not exactly true. Even with an unemployment rate of 10%, 90% of the
> labor force is employed, and that 90% - especially its richer half -
> has gone from pinching pennies to spending more. And it's coming out
> of current income, and maybe savings, but not credit. So far.
That's not what I've seen. In Q1, three-fourths of GDP growth came from consumption growth, but roughly 100% of consumption growth was financed by (1) growth in transfer income (i.e., the deficit); and (2) reduction in personal saving. Reduction in personal saving can mean running down savings or taking on debt - the two have equivalent effects on the balance-sheet bottom line. See here:
http://www.calculatedriskblog.com/2010/05/q1-pce-growth-came-from-transfer.html
There's a widespread belief that consumer credit has shrunken dramatically, but that's not entirely accurate. "CC outstanding" collapsed. But most of that came from banks writing off debt, not from a reduction in new extensions of CC. If you strip out charge-offs, consumer credit growth is currently running (eyeballing the chart at the link below) at about its 1995-2004 average, or only a bit below its 1986-2008 average. Not quite the nosebleed territory of 2004-08, but definitely within the normal bounds of the longer high-debt era.
http://macroblog.typepad.com/macroblog/2010/04/consumer-credit-more-than-meets-the-eye.html
SA