Friday, October 12, 2012

Real Total Debt per Civilian Employed (Musical Tribute)

The following chart shows the total inflation adjusted U.S. debt divided by the number of civilians who are employed. The debt includes households, businesses, state and local governments, federal government, domestic financial sectors, and foreign as seen in Table D.3 of the Federal Reserve's Z.1 Release (pdf).


Click to enlarge.

Lunatic Fringe (Red Rider)


Lunatic fringe, in the twilight's last gleaming
This is open season, but you won't get too far
'Cause you got to blame someone for your own confusion
We're all on guard this time against the final solution

Fail Blog

Ben Huh notes that FAIL Blog "really started to take off when the financial industry decided to — ahem — fail." As an example, at a Senate hearing in September 2008, a demonstrator held up a sign reading “FAIL” behind Henry Paulson., the former Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve.

Source Data:
St. Louis Fed: Custom Chart

13 comments:

Troy said...

I prefer to exclude TBTF, since AFAICT how Big Finance arranges their debt structure doesn't really matter in terms of systemic leverage.

http://research.stlouisfed.org/fred2/graph/?g=bKR

shows we've been treading water here.

Hmm, flipping the y axis:

http://research.stlouisfed.org/fred2/graph/?g=bKS

is a more accurate picture, too.

Stagflationary Mark said...

Troy,

I prefer to exclude TBTF, since AFAICT how Big Finance arranges their debt structure doesn't really matter in terms of systemic leverage.

To each his own. The conclusions are very similar.

I prefer to include TBTF. Why? As a taxpayer, I will be continually stuck with the near failure bills. Sigh.

Stagflationary Mark said...

Troy,

I also think that the total debt matters regardless of how it is structured.

Stagflationary Mark said...

Bonus thought.

I also think that the total debt matters regardless of how it is structured.

I suppose if Peter owes Paul $55 trillion but Paul also owes Peter $55 trillion then I might be tempted to change my mind.

Wouldn't that be something! All of our debt problems would go away if they'd just pay each other off.

Unfortunately, I'm fairly sure that's not the case. Sigh.

Troy said...

I don't know anything but lumping in financial sector debt is deceptive I think.

If BAC lends a credit company $1B then BAC has + assets and the CC has + debt, but the actual from whatI can tell leverage in the real economy hasn't changed at all -- all that matters is where this money goes into the real economy, not how many steps it takes to get there.

This issue came to my attention when looking at per-nation debt-to-GDP, and how UK finance companies were muddying the picture.

http://1.bp.blogspot.com/-IET45-HiW6s/T8T0M5jjOgI/AAAAAAAAAc8/dxp9iyHN8as/s1600/debt+to+GDP.JPG

So in the US the fact that TBTF is deleveraging doesn't really mean leverage here is getting any less.

How can it, when .gov is borrowing $1T+ per year.

Jazzbumpa said...

What do you make of the notion that finance sector debt is actually THE problem?

See the comment stream here.

http://www.angrybearblog.com/2012/10/debt-and-growth.html

Plus: 230.102?!?

Cheers!
JzB

Troy said...

Financial-sector lending to itself just seems entirely pass-through to me.

A lends to B lends to C lends to D.

vs. A lends to D.

In the former intermediated case, C's not going to stiff B unless D stiffs C, and B's not going to stiff A unless it can't get D's money from C.

Same systemic risk, D stiffing A.

But the intermediated case has tons of apparent financial sector leverage.

I admit that this is just my naive view -- my eyes glaze over when reading eg. Delong's detailed analyses on the system.

EconomicDisconnect said...

I always think of the warm up scene in "Vision Quest" when I hear this song.

Troy said...

Ah, One important difference though between A->B->C->D and A->D is the increased opportunity for higher debtor risk to creep in.

A->D is the George Bailey model of banking, while the intermediated case is Mozilo's.

Stagflationary Mark said...

Jazzbumpa,

Plus: 230.102?!?

I wanted the chart to be in August 2012 dollars. The CPI index was 230.102 in August of 2012.

What do you make of the notion that finance sector debt is actually THE problem?

I read your post last night and have been giving it thought since then.

I would expect to see a boost to GDP as debt increases. I see at least some of this as an illusion though. It pulls growth from the future. Debt growth is actually what I based my blog's name on.

There comes a time when there's nothing left to pull. Sigh.

That said, I do believe that there is an optimum level of debt that is actually good for an economy. Unfortunately, I think we're well past it.

When I graduated from college I needed a car. I assumed I would find a job so I was willing to buy a new car on credit. Overall, I think the purchase helped me. A new job did appear and I was able to quickly pay off the car.

When I wanted to buy my home in 1997, I didn't have the money to buy all of it with cash. I did have a pretty good idea that more money would be headed my way though (an investment). I think the loan helped me attain a higher standard of living than I would have otherwise had. I am now debt free.

Similarly, if a business has a great idea to create a new product and is fairly confident that it will sell well, then I think debt is a great solution. It's a win win for everyone involved.

I don't think this is where our country is headed though. I think we've relied on credit like a drug addict would. We need ever increasing amounts to get the same buzz. Sigh.

And lastly, I have never had a credit card balance. I was hard pressed to see how borrowing at 20% would ever help me, expect perhaps in desperation if no money was available for food. Food can be a powerful motivator. It pains me to think how many people are turning to credit cards these days for that very reason. Sigh.

Stagflationary Mark said...

Troy,

I admit that this is just my naive view -- my eyes glaze over when reading eg. Delong's detailed analyses on the system.

I hear you. I think the following quote sums up the complexity of our economic system.

The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents. We live on a placid island of ignorance in the midst of black seas of the infinity, and it was not meant that we should voyage far. - H.P. Lovecraft

I don't think even Ben "No Housing Bubble to Go Bust" Bernanke was correlating well enough to see the extent of what was about to happen.

Stagflationary Mark said...

Troy,

And lastly, I have never had a credit card balance.

Correction. I have never paid credit card interest.

Stagflationary Mark said...

EconomicDisconnect,

I always think of the warm up scene in "Vision Quest" when I hear this song.

You just gave me a vision of debt, lol.