Thursday, November 15, 2007

Financial Leverage v.2



This is the same data in my previous post but presented in a different way. Take all the savings (in the form of deposits, treasuries, corporate bonds, and so on) and pay off all the debt (mortgages, credit cards, ...). What's leftover? Not much lately. It's like a nasty millennium party gone awry (note the year when it turned negative). Now we're working at propping up the hangover. Bottoms up!

Better hope people don't have to start dipping into the stock market (stock equity withdrawal?) and/or the housing market (home equity withdrawal?) to fuel the difference at some point. You know, like when the baby boomers start to retire.

This isn't investment advice of course. I wouldn't even know what to say.

See Also:
Financial Leverage

Source Data:
FRB: Flow of Funds Accounts
BLS: Consumer Price Index

2 comments:

AllanF said...

Wow, I'm not totally sure what you've captured, or how proper a represenation of anything it is, but this is the most startling and outright scariest graph you've ever done.

Maybe with a 4th order poly overlay it won't look so dire. ;-)

Stagflationary Mark said...

AllanF,

LOL! Very well put. I'm not sure what I've captured either.

It doesn't necessarily have to be bad. It could just mean that people suddenly came to realize that the stock market and housing markets are the place to invest their savings and it just sort of fed on itself.

However, I tend to agree with you. It does scare me. Further, I started by asking myself a question. Is there really a debt bubble? I'm not so sure I like the answer that this chart heavily implies.