There has been a lot of concern about the huge federal deficits in the US. Over a trillion dollars in one year if I remember. I have a question. Is the money supply defined as the amount of cash and disposable or usable credit? If so, I note an article in the NYTimes that says:
"In the 12 months that ended in September, the number of Visa, MasterCard, American Express and Discover card accounts in the United States fell by 72 million, according to David Robertson, publisher of The Nilson Report, an industry newsletter. There are 555 million accounts still in the marketplace, he said.
In roughly the same time period, banks lowered credit limits by 26 percent, to $3.4 trillion, from $4.6 trillion, according to an analysis of government data by Foresight Analytics."
The article is talking about higher rates and fees for credit cards. I am interested in the last comment they made. Credit Card companies in the last 12 months have drawn down the disposable credit by 1 trillion $. Shouldn’t that be considered an offset to the federal deficit at least in macroeconomic terms?
In general, at the same time government are running huge deficits, private credit sources are shrinking their credit lines. Do these two events counter one another?
Thanks for any explanations people can give.