'It remains my view that the global Bubble has burst..'

Posted by ProjectC 
<blockquote>'The world outside the U.S. is about to embark on a major dollar debt deleveraging process..'

- Enda Curran, Hong Kong Faces Ghosts of the Asian Financial Crisis, Daiwa Says, April 7, 2016</blockquote>

<blockquote>'Second, the world is still working off the heavy debts and other imbalances accumulated during the 1980s and 1990s. As one example, total U.S. household debt as a percentage of disposable (after-tax) income has declined to 104 percent from its 130 percent peak, but remains far above the earlier norm of 65 percent. The household saving rate has rebounded from a 2 percent low in 2005 to 5.4 percent in February, but is still well below the 12 percent level of the early 1980s to which I expect it to return.'

- A. Gary Shilling, A Funny Thing Happened on the Way to Recession, March 31, 2016</blockquote>

'The U.S. economy has all the characteristics of a Bubble economy..'

<blockquote>'Chair Yellen stated that the U.S. “is an economy on a solid course - not a bubble economy” – “we tried carefully to look at evidence of potential financial instability that might be brewing.” That the Fed has for seven post-crisis years clung to near zero rates and a $4.5 TN balance sheet (with reassurances that it can grow larger) argues against such claims. That the Fed rather abruptly backed away from its 2011 “exit strategy” and repeatedly postponed “lift off” due to market instability rather clearly demonstrates the Fed’s underlying lack of confidence in the soundness of the markets and real economy.


It remains my view that the global Bubble has burst. The recent rally in global risk markets restored hope that things remain central bank-induced business as usual. This week provided support for the view that the respite from heightened volatility and vulnerability has likely run its course.


I’ve excerpted below from my recent analysis of the Fed’s Q4 2015 Z.1 “flow of funds” report:

Treasury Securities ended 2007 at $6.051 TN. By 2015’s conclusion, Treasuries had inflated to $15.141 TN, an increase of $9.090 TN, or 150%, in eight years. It’s worth noting that Agency Securities ended 2015 at $8.153 TN, having now almost recovered back to 2008’s record high.

Total Debt Securities (Treasuries, Agencies, Corporates & muni’s) ended 2015 at a record $38.741 TN. Total Debt Securities have increased $11.3 TN, or 41%, from what had been 2007’s record level. Total Debt Securities as a percent of GDP ended 2015 at a near record 217% of GDP. For perspective, this ratio began the eighties at 66%, the nineties at 110%, and the 2000’s at 140%.

Equities ended 2015 at $35.687 TN, or 199% of GDP. This compares to Equities/GDP of 44% to begin the eighties, 67% to start the nineties and 200% to end Bubble Year 1999. Combining Debt and Equity Securities, Total Securities ended 2015 at a record $74.428 TN. This was up 40% from 2007 (a then record 366% of GDP) to 415% of GDP. This compares to 109% to begin the eighties, 178% to start the nineties and 341% to end the nineties.

Household… Assets ended 2015 at a record $101.306 TN, up $2.953 TN during the year. Household Assets have increased almost 50% since the end of 2008. …Household Net Worth jumped another $2.607 TN last year. For the year, Household holdings of Real Estate increased $1.562 TN (to a record $25.267 TN), with Financial Assets up $1.171 TN (to a near-record $70.327 TN). Household Net Worth as a percentage of GDP ended 2015 at 484%. For comparison, Household Net Worth to GDP began the nineties at 379%, ended 1999 at 446% and closed Bubble Year 2007 at 461% of GDP.

Total Non-Financial Debt increased $1.912 TN in 2015 to a record $45.149 TN. NFD has increased $10.218 TN, or 29%, over the past seven years. NFD to GDP ended 2015 at a record 252%. For perspective, this ratio began the eighties at 138%, the nineties at 179% and the 2000’s at 179%.

The U.S. economy has all the characteristics of a Bubble economy – one increasingly vulnerable on myriad fronts.

- Doug Noland, Bubble Economy or Not? April 9, 2016</blockquote>


<blockquote>'The Great Depression was fundamentally the system’s response to the deep systemic structural impairment..'

'..the Great Depression .. was caused – like our crisis today – by too much debt.'

(Haptopraxeology) - '..We have lost three centuries as a result of ignoring our scholars!'</blockquote>