During the last 12 months, retail sales of autos were up 6.1% or by $65 billion. But then again, auto loan paper outstanding was up by nearly $90 billion!Why Dip Buyers Will Get Clobbered: The US Economy Isn’t Doing “Just Fine” | David Stockman's Contra Corner
That's right. Auto lenders--especially the legions of subprime nonbank operations that have sprung up with junk bond financing----have been extending credit to anyone who can fog a rear view mirror. Indeed, since mid-2010 when the auto recovery incepted, auto credit outstanding is up by $340 billion or by 90% of the $375 billion gain in auto sales.
Needless to say, virtually 100% debt financing of an auto sales boom is no more sustainable than was the MEW financing of household consumption last time around. Like then, the pool of credit worthy borrowers has been depleted, meaning that it is only a matter if time before the debt fueled auto boom of recent years goes pear-shaped.
In short, this is just one more case of the truism that under conditions of "peak debt" new borrowings do not increase GDP on a permanent basis; they just steal sales and output from future years, thereby booby-trapping the main street economy with recession risk that the Keynesian Cool-Aid drinkers refuse to recognize.