A welcome first: credit card debt fell last month, for the first time since they’ve been in use

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As the Guardian has reported this morning:

UK consumers’ credit card debt fell in annual terms for the first time since the Bank of England started tracking the data in 1987 in March, as lockdown froze spending but job guarantees kept millions in work.

The annual growth rate of credit card lending fell to -0.3%, the first negative annual growth since the series began.

British households repaid £3.8bn of consumer credit, which also includes personal loans, during the month - the largest on record.

Three thoughts. First. that's good news: credit cards are a massive contributor to the mountain of personal debt that is the real debt problem in this world.

Second, expect this trend to continue during lockdown, for obvious reasons.

Third, expect it to continue afterwards as well. As I have explained a number of times, the quite rational expectation that people have after a crisis is to save. Keynes called it the 'paradox of thrift' that exacerbates economic downturns when describing its consequences in the 1930s. There is little or no chance that once lockdown is over people are going to rush out to buy cars, kitchens and other big-ticket items. They will continue to pay down debt instead, fearing another crisis will not be far off (and they will probably be right about that).

What does that mean? It suggests a very slow economic recovery when gauged in conventional terms.

Alternatively, it means that a wise government would plan an unconventional recovery, delivering something like a Green New Deal.

The question is, do we have a wise government?