Saturday, December 6, 2014

The Stairway to Subprime Heaven (Musical Tribute)

The following chart shows the commercial bank interest rate on credit card accounts assessed interest minus the bank prime loan rate.

Click to enlarge.

Behold the lead zeppelin as it continues to inflate.

There's a worker who's sure
That a VISA is gold
As banks lend us a stairway to heaven

When we shop Sears we know
If the stores aren't all closed
With a card we can get what we came for
Ooh, ooh, as banks lend us a stairway to heaven

There's a sign near the door but we want to be sure
'Cause you know sometimes sales are misleading
In a Nook lies a book, there's a ring, yes some bling
Sometimes all of our wants are worth needing

Ooh, debt makes them plunder
Ooh, debt makes them plunder

There's a feeling I get
When I look at the West
That our credit is growing and heaving
In my thoughts I have dreams
Is debt smoked? Is it weed?
As Fed chairmen in suits stand staring

Ooh, debt makes them plunder
Ooh, debt really makes them plunder

And it's whispered that soon
They will raise rates in June
Central bankers will lead us to reason
And a new day will dawn
For those who stay long
But the markets may echo with laughter

If there's a bubble, say tomorrow
Don't be alarmed now
It's just healthy busts in the making
Yes, there are long bonds we can go buy
And for the long run
There's still time to sell some risk we own

As debt makes them plunder

Parabolas grow and yet they blow
In case you don't know
The math is calling you to listen
Investors, how can you expect more?
And did you know
Our stairway lies on this chart's long-term trend?

And as stocks ride on up and goad
The stories taller as they grow
There shops this worker we all know
Who shines plastic and wants to show
How VISA gave us all this gold
And if you watch trends very close
Net worth will change when it implodes
When bills are one and bills are all
Some go bankrupt and plan to fold

'Cause banks lent us a stairway to heaven

Source Data:
St. Louis Fed: Custom Chart


mab said...

Interesting chart. Speaks volumes.

In theory, the Fed/Gov't helps banks so that banks can help the sheeple. Peachy, right?

In practice, the Fed/Gov't helps banks and banks help themselves!

Stagflationary Mark said...


I think your theory is sound but I also can't help wondering if there isn't something else going on as well.

Perhaps the most credit worthy credit card borrowers opted to pay down their balances?

Perhaps those who remain are just one paycheck away from financial ruin?

Perhaps banks only find out they are "swimming naked" during recessions?

Perhaps over entire business cycles the tide is slowly going out?

I always pay off my credit card each month, without fail. My credit card company has given me a generous credit line. My credit card company should be very concerned if I ever begin to run a balance.

It might mean that I've exhausted all other assets and will be using them to fund my newly acquired homeless lifestyle. If given the choice of buying groceries on credit or starving to death, I would certainly choose the former. I never forced my credit card company to offer me unsecured credit. They chose to do so.

How would they know ahead of time? One day I'm totally fine and then one day I'm not. My long-term credit history would be rendered useless.

Got heavily financed cardboard box? Just a thought.

Stagflationary Mark said...

One more thought.

None of this would be a problem if the Fed would just set short-term interest rates at negative 20%. Banks could then easily lower credit card interest rates to 0%.

Just think how prosperous we would be with infinite credit card debt expansion!

What's the worst that could happen? Mwuhahaha!