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As seen using the red channel, this 60-year linear trend has failed by a large amount in the aftermath of the Great Recession. Epic failure, actually. Should have more of them. Never before has so much additional prosperity been generated by so little additional debt.
Of course, not everyone believes that fairy tales always have happy endings. Here's a scary fable involving bears that's just in time for Halloween.
Net worth has been falling rapidly lately, thanks to the stock and bond markets. We'd be back in the channel if it were to fall another 30% or so, assuming it were to continue to happen rather quickly. And what would be quicker than rapidly rising mortgage rates combined with million dollar homes?
Of course, there's another way to get back in the trend channel. Total credit market debt outstanding is only $91.2 trillion. Yes, only $91.2 trillion. A pittance, really. If we were to quickly increase it by 40% then back in the "safety" of the declining channel we would be. Think what we could do with all that free money! Here's an idea. A $36 trillion Halloween party in the name of world peace! Everyone on the planet could be invited. Nobody goes home empty handed. Woohoo!
Please don't confuse my love of gallows humor for sarcasm, nor my love of sarcasm for gallows humor. It's both. It's almost always both these days, lol. Sigh.
9 comments:
QE caused the failire and that went into the market, correct? Is it possible to run the same chart less market wealth? I feel that chart might be a good illustration of the air supporting the bouncy house.
Shookie,
Perhaps this chart would be more informative:
https://fred.stlouisfed.org/graph/fredgraph.png?g=V9Ih
In my opinion:
1. The Great Recession scared many from taking on more debt at the same pace they they had been.
2. This, in turn, scared the Fed into a zero interest rate policy to encourage debt growth.
3. The zero interest rate policy also exploded net worth higher by artificially boosting stocks, bonds, and real estate. (Suddenly, every overpriced investment seemed cheap compared to zero interest which offers nothing.)
4. The artificially boosted net worth caused people to spend like drunken sailors (myself included, I must admit).
5. Spending like drunken sailors leads to inflation as we order more goods and services than the economy can support.
6. This, in turn, scared the Fed into a rapidly increasing interest rate policy to encourage people to stop.
7. And here we are. Watch out below. *cringe*
As for my own spending like a drunken sailor story:
I’ve installed and filled quite a few bookcases since the start of the pandemic. I have rediscovered a love of board games from my college days and also a love of books, especially graphic novels. Constant stream of deliveries. This too shall pass though. Much future demand was brought into the present. My future demand will be far less now. Our house is not infinitely large and is nearing max capacity for my midlife crisis hobbies. My lack of future demand will be deflationary, especially when compared to my very inflationary pandemic demand.
I have been a frugal saver most of my life, and I temporarily became a drunken sailor spender. I have to wonder what people who had been drunken sailor spenders all their lives have been doing. What’s the next step up from drunken sailor? Drunken sailor lottery ticket winner? Not sustainable, whatever it is.
The markets are breaking and there’s no telling how much more breaking there will be. Seems like we’re just getting started. Heck, unemployment hasn’t even gone up yet. Scary to think how much damage has already been done without any job losses to speak of.
#1 reason to expect more market turmoil:
https://twitter.com/jimcramer/status/1583567219526553600?s=20&t=Qhm7wKUYwQy7iBVS7MzXeA
People are finally figuring out that Cramer is reliably WRONG.
Interesting, thank you.
It appears that we are living a parralel life, from drunken sailor to bookshelf! I definately have a weakness for books that I plan to read in retirement.
Retirement ugh. About 80% of my retirement is locked up in corporate stock, not available until the Company sells in 5ish years. All I can do is watch. Never Better!
Who Struck John,
A sarcastic blast from the past:
http://illusionofprosperity.blogspot.com/2010/06/sarcasm-report-v52.html?m=1
Shookie,
1. One of the first things I did when I retired in 1999 was visit every Half Price Books store near me. Bought about 100 books.
2. The vast majority of my retirement was locked up in the stock of a private company (not the one I worked at). Had to wait just over 5 years before it unlocked. Like you, all I could do was watch. And hope (especially since my job had become a hellhole).
Crazy parallel.
Other than cheap books, I only splurged on one thing when I retired: a baby grand piano. Bought it at Costco. Are you planning to splurge on anything when you retire?
Farmland. My wife and I own a small farm and could use additional grazing acerage. Sounds simple, right? We live an hours commute outside the cities (WI) and every sand lot available sells almost instantly for housing development at prices that just make me shake my head.
I grew up in rural Eastern Washington. I cringe every time I look at housing prices in that small rural farming town, well lately anyway. Cringe.
Not simple. At all.
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