Thursday, June 10, 2010

Home Mortgage Debt (Musical Tribute)

On September 17, 2007 I posted the following chart and commentary.

Based on the data below, a potential peak appears to have been pushed out a few quarters. It could even be argued that a peak is not coming.

Using hindsight, the peak came all right. Home mortgage debt peaked right about where the chart showed it would. It simply peaked at higher level. It was like one last gasp before the descent.

Home mortgage debt peaked at $10.6129 trillion in the 1st quarter of 2008. It has fallen to $10.2358 in in the 1st quarter of 2010 and continues to fall. It also appears to be accelerating. This most recent quarter's data is the fastest rate of decline yet.

Seasonally Adjusted Annual Rates

2008 Q2: -0.5%
2008 Q3: -2.4% <--- Sheer panic
2008 Q4: -1.8%
2009 Q1: -0.1% <--- The stock market finds a floor
2009 Q2: -1.6% <--- Dennis Kneale "crows"
2009 Q3: -3.4% <--- Dennis Kneale Show canceled
2009 Q4: -1.1%
2010 Q1: -3.8% <--- Fastest declining annual pace yet
2010 Q2: ____? <--- Dennis Kneale's off Power Lunch

Well, that's just great. What if they replace the Dennis Kneale with a permabear? How would I be able to compete if CNBC starts pandering to the masses? Say it isn't so!!

In all seriousness, for an economy supposedly dependent on credit as its life-blood, this data looks pretty bad to me. I suppose it could be worse. The Federal Government's debt could have been rising at an 18.5% annual pace in the 1st quarter. You know, just like it did. Oops. I guess that wasn't all seriousness. I also snuck in some sarcasm in there too. Sorry about that!

Roubini Urges ECB to Cut Rates to Offset Austerity (Update1)

“Going to zero alone is not going to be enough, it’s 100 basis points,” Roubini said. “They need to go to zero, they need to do more quantitative easing, they need to support dysfunctional markets, they need to signal that they are actually not uncomfortable with a weaker euro as long as that is a gradual and orderly process.”

Bernanke Disagrees With European Austerity Moves

I like long TIPS and I can not lie
Our auto workers can't deny
That when our Ben walks in with more itty bitty rates
And our homes just slow their pace
Stocks get sprung
What a sell off so tough
'Cause you notice it all was bluffed
Deep in the debt we're swearing
We're hooked and we can't start caring
Bernanke, I wanna get with you...

You know the words. Sing along!

Source Data:
FRB: Flow of Funds


Anonymous said...

inflation up in China...not much though. Plus they have the luxury of slamming the breaks with a rate hike if they wanted to.

Stagflationary Mark said...


Thanks for sharing that.

From your link...

"That was driven by a 6.1 percent rise in politically sensitive food costs, up from April's 5.8 percent gain."

It is and was my belief that inflation in food prices in China cannot be tolerated and that inflation tends to hit food prices hard (as food is quick to be hoarded).

As you say China has the power to stop it. I think the recent wage hikes were an attempt to ease that inflationary pain, but rising wages tend to create more inflation.

I'm bracing for more deflation here, but I still embrace inflation protected treasuries in case I'm wrong.

Troy said...

China could double its minimum factory wage, double the strength of the yuan, and Toyota wages here would still be 5-10X greater than there.

Your chart is too tame, this one:

lays it all out

Stagflationary Mark said...


Indeed. Tacking on all forms of credit makes it look even worse. I was just sticking to housing debt though since it offers an indication of where our housing markets may continue to head.

Thanks for offering that. It's a chart that often interests me too.

For those not following it, here's something to ponder.

March 11, 2010
Credit Cards Being Paid Off?

watchtower said...


My brother sent me an email this morning with this link included:

These bicycle prices from Sears were from 1969 (I'm 45 years old myself and my childhood friend actually had that bike with the steering wheel on it way back when) and my brother was wondering for just how much longer can the Chinese continue to produce bikes today at almost 1969 prices?

I told him I didn't know, but I did know someone who might give it a shot.

Would you have enough interest in this subject to give your thoughts on it?

Stagflationary Mark said...


China labour unrest may signal end of cheap manufacturing

The average hourly factory wage in China is about 75 cents an hour...

US Minimum Wage

1969: $1.60

In my opinion, the key would therefore be the following charts.

Rubber Prices

Iron Ore Prices

Copper Prices (Side Topic)

Are the price hikes real and sustainable or are they going to look like aluminum someday?

Aluminum Prices

Thanks for asking! I stumbled upon these charts looking for some sort of reasonable answer to your question. That's the best part of doing this blog. I probably would never have found those charts otherwise. Rubber isn't a metal so I had to go looking for it specifically.

Stagflationary Mark said...

Here's a bonus chart.

Poultry (chicken) Monthly Price

Where are all the chicken speculators? That's the kind of slow steady climb one would expect in a fairly tame inflationary environment.

The price of chicken has roughly doubled since 1985 and so has the CPI. Of course, you'll never see that mentioned on a site like shadowstats.

Perhaps Foster Farms needs a new ad campaign.

Chicken! It's a safe store of value in these trying times!

watchtower said...

Thanks Mark!

I had no idea that rubber and iron had shot up like that, copper yes, but not those two.

Now that I think about it, I have been seeing these pick up trucks loaded down with old rusted tin roofs, mattress springs and what not, no doubt going to the recycler to get a buck or two I would imagine.

Once again thanks, I'm meeting my brother and his family for lunch tomorrow, hopefully this will add a new dimension to our discussion when it comes up.