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The chart above shows the inflation adjusted total value of household real estate minus the total home mortgages from the first quarter of 1960 to the first quarter of 2010 (as seen in Table B.100 in the Flow of Funds report).
The chart above shows the inflation adjusted cumulative trade deficit from the first quarter of 1960 to the first quarter of 2010.
This chart shows the size of the inflation adjusted cumulative trade deficit in comparison to the total inflation adjusted U.S. home equity.
The cumulative trade deficit is the "gift" that just keeps on giving. Too bad the same could not be said of home equity.
Ouch.
See Also:
Cumulative Trade Deficit Nightmares
Source Data:
FRB: Flow of Funds
St. Louis Fed: Balance on Current Account
14 comments:
Stag,
The cumulative trade deficit is the "gift" that just keeps on giving.
It's a give and TAKE relationship.
There is a silver lining though. What can't be paid won't be paid. Creditors are already receiving less interest (real & nominal) than they initially expected. In due time, they'll be receiving less principle too.
As shown by our trade deficit & Gini coefficient (amongst other things), we're in far worse shape than Japan was heading onto their debt deflation.
We'll be gutting social security, public benefits and pensions to preserve the value of fictitious wealth. Will that end or accentuate the vicious cycle? I can't wait! Warren Buffett says it's a wonderful system. He should know!
Usury is the road to prosperity. Who knew?
Stag,
I respectfully offer a modification.
The greatest trick the central bankers ever pulled was convincing the world that $14 trillion of home equity DID exist.
Debt is wealth, okay. But does it follow that unproductive and fraudulent debt are also wealth?
"Financial innovation" and Wall Street "high finance" became complete and utter shams. Catchy phrases to justify usury, wealth extraction & ponzi debt creation.
Can you believe that the Fed allowed Wall Street to transform our money & savings into usurious debt?
Here's a salesman I like. He says that his firm is not worried about inflation but they know that some customers are, so they've put together a fund for them. Goodness me, that's almost frank.
http://www.citywire.co.uk/wealth-manager/video-jim-leaviss-on-his-new-inflation-busting-fund/a428528
You are a US politician. Sometime in the near future, you will have to choose between:
a) swingeing spending cuts, affecting entitlement programs
b) increasing tax rates to high levels.
c) defaulting on the debt to China/foreigners.
I am not sure C is not an option if at that point its wild and crazy. Look, for GM they could screw certain bond-holders while helping other stakeholders. The USA could simply give a haircut to all foreign own-treasuries. What did Argentina end up paying?
On a side note, I think we let a crisis go to waste in 2008. We should have demanded Fannie Mae and Freddie Mac bondholders take a hair cut. China was the largest bond-holder, and it would have sent a very specific signal to them that buying US bonds to sterilize export earnings to avoid appreciation of your currency can have bad results.
BTW, previously a Chinese company supposedly having an implicit central government guarantee defaulted on its loans to foreigners, so there is even a precedent.
Coba
BREAKING NEWS
Obama, today in Ohio, says America had "the illusion of prosperity"
-jus me
Don't know how long this link will work for, but the text of O's speech is here.
See
http://www.marketwatch.com/story/full-text-of-president-obamas-speech-in-ohio-2010-09-08?reflink=MW_news_stmp
From the link:
"The idea was that if we had blind faith in the market; if we let corporations play by their own rules; if we left everyone else to fend for themselves, America would grow and prosper.
For a time, this idea gave us the illusion of prosperity. We saw financial firms and CEOs take in record profits and record bonuses. We saw a housing boom that led to new homeowners and new jobs in construction."
etc, etc, etc
Mark, maybe the white house loves you!
Now if you can just fit "stagflation" into his next speech, you'll be on a roll...
This is awesome and will include it tonight! At least Obama did not steal the picture of your dog Mark! Great find jus me.
mab,
I struggled with that "Unusual Suspects" quote. When the $14 trillion seemed to be there, the central bankers assured us it was there. So you are definitely right.
However, when much of the $14 trillion vanished Greenspan blamed the ratings agencies and the people who trusted their judgment. That implies the $14 trillion never did exist.
So I guess it just depends on when we listened to the central bankers. Before or after the crash? ;)
dearieme,
He says that his firm is not worried about inflation but they know that some customers are, so they've put together a fund for them. Goodness me, that's almost frank.
Oh my! Imagine if that concept got popular.
Picture celebrity branding at places like K-Mart.
"While we don't personally shop there, we know that some of our fans do. We've therefore put together a product just for them."
Coba,
"BTW, previously a Chinese company supposedly having an implicit central government guarantee defaulted on its loans to foreigners, so there is even a precedent."
I'd enjoy reading about that. Do you have a link?
jus me,
For a time, this idea gave us the illusion of prosperity.
Holy cow!
I fear what he'd say about stagflation.
He could say...
"Americans should have braced for deflation when oil was $145+, but unfortunately they were all easy stagflationary marks."
Hahaha! Ouch. Thank goodness I was just a paper stagflationist. My TIPS and I-Bonds did just fine. :)
GYSC,
He might not be stealing my pictures, but he is stealing the limelight!
Cast in this unlikely role
and ill-equipped to act,
with insufficient tact,
one must put up barriers
to keep oneself intact.
The weird part is that we didn't have a massive trade deficit when Rush released that song in 1981. They are like the Nostradamus of rock bands.
Go figure.
GITC bankruptcy in 1999.
http://www.angelfire.com/stars/tkchang/Bankruptcy_in_China.htm
http://findarticles.com/p/articles/mi_qa3674/is_200304/ai_n9171917/
Actually,I could not find out exactly what foreign bond-holders had settled for.
Coba
Coba,
From your links...
The experience, however, has confirmed the sage advice of China investment counselors: don't let the money out of your sight or you will turn out to be the fool that the recipients of the money believe you to be.
Nice.
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