Friday, July 12, 2013

Exponential Trend Failure of the Day

Click to enlarge.

Enough said.

Source Data:
St. Louis Fed: Real Estate Loans at All Commercial Banks


Troy said...

ten years ago we did the death cross . . .

man the system was wired to go on tilt then.

~$2.5T credit overhang still by this chart

Adding in per-worker gov't debt:

shows that as consumer debt has gone down $10,000, gov't debt has gone up $50,000 (actually, more like $40,000 not counting Fed's QE buys).

Stagflationary Mark said...


ten years ago we did the death cross . . .

I became a permabear 9 years ago. I'm continually told that this is a once in a lifetime opportunity to embrace "risk on" assets though.

Recently, one such individual on CNBC had data going back to the 1800s to back his claim. I wish I knew what he was smoking. He just looked so darned happy. One might even say euphoric. I can't seem to get that same level of buzz from the charts I create. Your charts don't exactly inspire me to take on extra risk either, lol. Sigh.

dd said...

Wait one minute. Freddie Mac is introducing Structured Agency Credit Risk (STACR) securities, designed to offload the first-loss piece of certain government-guaranteed MBS into the private capital markets.
What could go wrong with this one time opportunity to buy stark securities?

Stagflationary Mark said...


What could go wrong with this one time opportunity to buy stark securities?

Absolutely nothing! The Fed has permanently put a stop to recessions!

Oh oh. We managed to blow a fuse in this blog's sarcasm meter. Fortunately, it's not a serious problem. I hoarded some extra sarcasm fuses back in 2004. Whew!!

Troy said...

that's just it though, recent recessions are the aftermath of bubble busts -- 1990, 2001, 2008.

blue is age non-military/non-prison 20-54 population, red is jobs.

This economy is on a pretty powerful stimulant again -- QE3 -- and the downside risk is a weaker dollar, which is kinda what we want anyway.

Each year 4M boomers are going to hit retirement age now.

If the Fed just committed to buy bonds equivalent to our trade deficit -- which is essentially what they're doing now -- we'd be in a pretty stable growth regime.

The more they print, the more competitive US mfg becomes, lessening the trade deficit.

Except for the oil bit. And the fact that exports are inflationary : )

Stagflationary Mark said...


The more they print, the more competitive US mfg becomes, lessening the trade deficit.

Yes, but how many jobs will the fully automated US manufacturing industry of the future actually create? It all comes down to jobs to me and I strongly believe that the employment party ended in 2000. Further, we're hardly the only country trying to competitively devalue a currency. It's a dog eat dog world out there.

What's going to happen to recession odds if 4m boomers turn as "risk off" as I have been since retiring in 1999? I can't afford to take big risks. I have no job to fall back on if I swing for the fences and miss.

Troy said...

I see money as water for the economy, and we need more irrigation.

All the debt leverage and charts is secondary to the question of whether we are really living beyond our means.

The answer to the affirmative is the trade deficit, but the answer to that is Triffin Dilemma and if the world wants a strong dollar who are we to complain.

The argument that we are not living beyond our means is our income disparity. We are simply substituting borrowing for taxes, and consumer debt for wages.

More automation and rising productivity isn't a negative if the added wealth is distributed.

We have a political problem not an economic problem.

Same thing with the Japanese, they've been able to feed themselves, they just, like us, have a problem with the distribution of profit to the actual producers, and an economy that pulls money out of the middle class from every angle.

Maybe in the next 20 years We The People will start getting on the same page with all this, the late "99%" movement being the Populists to a later Progressive reform wave.

One thing I was thinking today in the shower was what if the Republicans tack away from their Job Creator BS and actually start walking the talk wrt economic mis-structuring.

One thing they want is the White House in 2016. If they get it, I expect another round of Reagan-Bush and Bush-Cheney pump & dump -- an economy with debt well out to current Japanese levels.

If they can swing that we'd see at least 12 years of Republican leadership, out to 2028.

Who knows, maybe our politics won't be so actively stupid by then . . .

Stagflationary Mark said...


More automation and rising productivity isn't a negative if the added wealth is distributed.

I would absolutely agree with that. The expanding food stamp participation and the rise in the gini index imply that we aren't on that path though.

As I've pointed out in the past, George Jetson seemed to be doing great working just 9 hour workweeks. However, I don't think most workers of today will ultimately be paid 4x more to work 75% less. Sigh.

Stagflationary Mark said...

In any event, I hope that I'm wrong. The better the economy does the better I will do. Although my investments would be hurt on paper if real interest rates due to a truly booming economy, it makes absolutely no sense for me to root for lower real yields. As my bonds mature, I'd like to reinvest at higher rates.

This means that I am a bear who truly wishes the bulls are right. I just don't think we'll be that fortunate.

Stagflationary Mark said...

Oops. I meant to say if real interest rates rise due to a truly booming economy...

Troy said...

yeah, the key question is whether CBO's $20T economy (2012 dollars) is coming in 2020 or not.

If it is, then yields can go up from here regardless of the income distribution.

If not, something's going to break.

Higher yields will be a wealth transfer to the right part of the Gini curve as it is.

The only counter-balance to this is the electorate revolting at the polls, like they did 1930-36.

They put the fear of god into the plutocrats. Republicans lost ~HALF their seats in the House and ~2/3 of their seats up in the Senate.

I know people like Mish don't like to hear this, but the economic imbalances are going to require political solutions.

Money in isolation is too powerful on its own. The more concentrated, the stronger its institutional defenses and predatory capabilities.

If capitalism were solely about the creation of new wealth, that wouldn't be such a problem. But too much of it nowadays is about rent-seeking in existing wealth -- health, energy, housing.

The solutions are available, but it's going to take either the Dems retaking the House or the Republicans rethinking their received dogma.

This is not to say politicians can necessarily fix things; to really screw things up requires a government, too.

Only relatively recently did I discover that my beloved nordic economies had somehow allowed their consumer debt sectors to balloon so disastrously.

Troy said...

Mish today:

"Then again, perhaps 650,000 furloughs is just a tiny down payment for what needs to happen to a very bloated military sector."

I agree, but don't see what's going to replace these millions of jobs.

Non-institutional population doesn't count military, so my per-capita graphs don't accurately reflect reality.


is military spending per 25-54 yo.

That's $500/mo from every working-age person.

In 2012 dollars:

shows the late peak was equivalent to Korea, Vietnam, and the Reagan expansion.

But $800B/yr is keeping a lot of money in circulation . . . without Uncle Sugar so many regional economies would contract severely

This place is about as dysfunctional as 1980s Soviet Union I think, we've just had the ability to borrow trillions to paper over the imbalances.

Stagflationary Mark said...


I agree, but don't see what's going to replace these millions of jobs.

Yeah. *shrug shoulders*