Saturday, February 7, 2015

We Are Addicted to Debt (Musical Tribute)

The following chart shows the annual growth rate of consumer credit minus the annual growth rate of wage and salary disbursements.

Click to enlarge.

We're "high" above the median. Isn't that wonderfully euphoric?

1. Over the ultra long-term, only 0% (or less) is sustainable.
2. If you thought the Great Recession taught us a lesson, think again.
3. Way to go Greenspan, Bernanke, and Yellen! Confidence abounds!
4. Now what?

Source Data:
St. Louis Fed: Custom Chart


Shookie said...

A chart! Consumer credit for a new PC? Could a parabola be next?

Stagflationary Mark said...


Yes, a chart! That's the good news.

No credit used. PC still dead. Used girlfriend's laptop. Chart not as fun to make. Laptop could really use a mouse. Therefore, don't expect a plethora of charts from here. That's the bad news.

However, charts will continue to trickle if the data is sufficiently amusing/horrifying to me, lol. Sigh.

Anonymous said...

Til debt to us part.

Stagflationary Mark said...


Nice! You know I like puns.

The debt penalty leads to capital punishment!! ;)

TJandTheBear said...

These puns are getting debtly. :-)

Stagflationary Mark said...

Debtly? Bonds? License to bill? The man with the golden pun? To borrow never dies!

Q the theme song!!!

Oh, oh. Seven puns!! ;)

Anonymous said...

That's punishment for sure.

Stagflationary Mark said...

Speaking of punishment, the 5 Year TIPS has a negative interest rate.

Talk about puny real yields in this supposedly rising interest rate environment, lol. Sigh.

Anonymous said...


Why do you buy TIPS when we are clearly in a deflationary environment? That is unless you believe inflation is the eventual end game.

Stagflationary Mark said...


Thst's a good question. There are two reasons I bought TIPS.

1. I believed that real growth would slow over the long-term. Real yields are tied to real growth. TIPS are therefore a pure play on that belief. As for inflation itself, I'm mostly an agnostic. I currently lean deflationary but once leaned stagflationary. I may toggle yet again over the long-term. Who knows?

2. I want inflation protection on my treasuries for the same reason I want fire insurance on my home. I don't believe my house will burn but I want the insurance just the same.

I also bought EE Savings Bonds in recent years, and would buy more if I had more money to deploy. Guaranteed to double if held 20 years, which works out to 3.53% per year. The government is dropping the ball here. Should not be yielding so much more than a comparable 20 year treasury. It's probably only a matter of time before they change the terms for future purchases. The change will not be favorable to savers, but what's new?

Once again, this is notbinvestment advice. Just opinions.

Stagflationary Mark said...

For those who buy bonds and hold to maturity (as I do), TIPS are not an inflation bet. They are a pure play on real growth.

Higher inflation will never help me as a TIPS investor. It will only hurt, just not as much as it will hurt those without inflation protection. Higher inflation lowers my net real yield after taxes. More inflation means more taxes.

Even as a TIPS investor, I therefore root for 0% inflation. I have seen TIPS investors root for higher inflation. It makes little sense. I will not make out like a bandit if inflation is higher any more than I would make out like a bandit if my house burns. In fact, a really high sustained inflation rate could financially ruin me as I would be forced to sell TIPS just to pay the taxes on the inflationary gains. Each and every year!

Anonymous said...

Thanks for the response your thought process makes good sense.

mab said...

Over the ultra long-term, only 0% (or less) is sustainable.

I used to think the same way. Now I'm not so sure.

Welfare, bailouts, Gov't deficit spending. Oh, and lots of institutional lies!

Stagflationary Mark said...


I agree with you over the long-term but the ultra long-term is another matter.

Of course, many things are not sustainable over the ultra long-term. For example, what's the government plan for when the sun expends all its fuel? I don't think printing more money will fix that, nor would extra institutional lies, lol. Sigh.

What's the point? We still live in a world where people build homes in flood plains. I guess it promotes economic growth to continually rebuild these homes. Go GDP!!