Credit growth (in red) is slowing.
Savings growth (in blue) is slowing.
Without either of those two, I guess we'll just have to rely on wage growth. Good luck on that one. Sigh.
This is not investment advice.
See Also:
Low CD Rates: Lending Drought and Savings Monsoon
Source Data:
St. Louis Fed: Custom Chart
You can't get (life)blood from a turnip.
ReplyDeleteWho Struck John,
ReplyDeleteThe economy's suffering from deep vein trombone us, much to the dismay of the IV league. ;)
Mark,
ReplyDeleteTake a look at 200 years of 10y interest rates.
The spike that peaked in 1981 was the highest on record and rates spent a long time above the long term average.
Maybe now we are experiencing the equal and opposite reaction?
And meanwhile, baby boomers were conditioned by that spike and refuse to buy bonds now.
CP
I'll be doing a post about it.
ReplyDeleteIt's my thesis that the baby boomers CAUSED that spike by their mere presence.
ReplyDeleteWell, them all turning 25 and needing to establish households, and the ability to borrow, borrow, borrow.
Median boomer was born in 1957 and I think it's no accident that Peak Inflation hit right when they did.
The 1970s get a bum rap, but they had 20M jobs created, same as the 1980s and 90s, but on a smaller base.
We were all so horribly under-leveraged in the 1970s. A different regime.
http://research.stlouisfed.org/fred2/graph/?g=rVL
'Total' (ex-finance) Debt / wages.
Debt-GDP isn't all that accurate given it's the poor people who NEED to borrow.
http://research.stlouisfed.org/fred2/graph/?g=rVO
ReplyDeletethat's what I'm sayin'
The other thing is that the immigration floodgates were opened in 1965. That suppressed wages and increased real estate prices/rents. So you had to borrow more to maintain your lifestyle.
ReplyDeleteBut Troy, that is a good theory.
ReplyDeleteCan you find other countries to test it against?
CP,
ReplyDeleteAnd meanwhile, baby boomers were conditioned by that spike and refuse to buy bonds now.
Agreed!
Troy,
Debt-GDP isn't all that accurate given it's the poor people who NEED to borrow.
Agreed!
I would add:
Employed Married Women per Capita
That growth engine sure lost some steam.
Can you find other countries to test it against?
ReplyDeleteIt also pipes into trade balance, since in general exports are inflationary and imports are deflationary.
http://research.stlouisfed.org/fred2/series/MANEMP
From 1960 to 1980 we got 5M new mfg jobs, a 33% expansion.
The analysis itself simply looks at how credit pulls purchasing power forward.
http://research.stlouisfed.org/fred2/graph/?g=rVS
YOY consumer credit growth
http://research.stlouisfed.org/fred2/graph/?g=rVT
real per-capita consumer credit outstanding
it's my thesis that the dip ca. 1980 was Volcker fighting the inevitable.
Can you find other countries to test it against?
ReplyDeleteThere was an interesting chart from late 2012 that somewhat speaks to the theory.
Troy,
ReplyDeleteFrom 1960 to 1980 we got 5M new mfg jobs, a 33% expansion.
The optimist in me wants to click on that link to see how many manufacturing jobs we've added since then.
The pessimist in me already knows, lol.
Gallows humor. Sigh.
Nathan,
ReplyDeleteFrom your link:
It's what I like to call "the most depressing slide I've ever created."
I'm sure if he really works at it, he can come up with some similarly depressing slides. Sigh.