That giant snapping sound must have been your wallets closing. Americans slashed their borrowing in July by the largest amount on record, according to new numbers from the Federal Reserve. People pulled back on debt at a yearly pace of 10.4 percent, and that's after a 7.4 percent annualized drop in June.
All told, Americans borrowed $21.6 billion less in July than they had in June, the biggest one-month drop since records began in 1943. Not even Cash for Clunkers could stop the rapid draining of credit. From AP:
Demand for non-revolving credit used to finance cars, vacations, education and other things fell by $15.4 billion, also a record decline. That 11.7 percent pace was on top of an 8 percent annualized decline in June.
This economic crisis has been described as a crisis caused by too much leveraging (or borrowing) followed a painfully rapid deleveraging (in which debtors either pay off what they owe or creditors give up collecting). It's also a crisis of overconsumption followed by a painfully steep decline in consumer demand. In today's numbers from the Fed, those twin factors meet.
Total consumer credit now stands at $2.47 trillion.