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The data is drawn from Table L.100 Households and Nonprofit Organizations.
Deposits are taken from line 2 of the table.
Credit Market Assets are taken from line 7. They consist of treasuries, savings bonds, municipal bonds, corporate bonds, and other forms of household savings.
Credit Market Liabilities are taken from line 25. They consist of home mortgages, consumer credit, bank loans, and other forms of household debt.
For the optimists, I offer a blue line version of the data. It shows the increasing leverage over the years as a ratio between credit and savings. Optimists might say, "Credit is the life-blood of our economy. That blue line clearly needs to start going back up again. Only then can things return to normal."
For the pessimists, I offer a red line version of the data. It basically shows savings minus debt. They might say, "Saving is critical. That red line clearly needs to go back up. Only then can things return to normal."
As seen below, I think it is safe to say that our political leaders have embraced both versions. They have plenty of practice talking out of both sides of their mouths though.
May 1, 2007
Bernanke Advocates More Saving
“Saving is critical,” Bernanke said in response to questions after a speech at Montana Tech.
January 8, 2009
Credit: "The Life-Blood of the American Economy"?!
Yes it has finally come to this... The "experts," the politicians, the corporations, and the financial community are beating their chests for even more bailout credit, deeper debt, more government spending and larger loans. I can't stand hearing this soundbite of stupidity, yes even from the Chairman of the FED!! When did credit... when did owing other people even more money become the Life-Blood of the American Economy?!
It's the United States Country Fair. Step right up. Everyone is a winner! All you need to do is simultaneously save more AND borrow more. Barring that seemingly impossible task you can also win a prize by simply tossing a "quarter" of your earnings onto the wobbly glass plates. If it manages to somehow stick, we'll give you an 800 pound stuffed gorilla!
Source Data:
Flow of Funds Level Tables (PDF)
2 comments:
Stag,
That's an interesting chart. The year 2000 was a doosie - an event horizon where positive turned to negative.
Line 25 (treasury securities) is interesting. You definitely were not following the herd over the past few years. At the end of 2004, households had ~ $535 billion of treasury securities. At the end of 2008, household holdings of treasury securities had dwindled to $273 billion.
Of course now that treasuries are yielding next to nothing, households (like Ben Stein's) can't get enough of them. Go figure.
mab,
Investors piled into my TIPS as oil approached $150, then piled out as oil crashed.
I'm patient. I'm reasonably confident that they will panic back in at some point. In all honesty, I would prefer that they didn't though. As a long-term saver, I'm reasonably happy with the real yields right where they are, even if I earn 2% with -2% inflation (net 0% since they are tied to inflation).
Further, if this deflation miraculously does continue for a decade, TIPS do have deflation protection at maturity. I'll get the full face value. That would be one heck of a bonus. I'm hardly holding my breath though. I'll leave that for those buying non-inflation protected treasuries.
As a side note, what is it about the top of a rollercoaster ride or an asset bubble that instinctually causes us to hold our breath?
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