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Tag Archives: Debt

Who Is Funding Uncle Sam?

In, The Lowest Common Denominator, we quantified the extent to which growth of consumer, corporate, and government debt has greatly outstripped economic growth and our collective income. This dynamic has made the servicing of the debt and the ultimate pay back increasingly more reliant on more debt issuance. Fortunately, taking on more debt for spending/consumption and to service older debt has not been a problem. Over the past twenty years there have been willing lenders (savers) to...

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Pulling Forward versus Paying Forward

Debt allows a consumer (household, business, or government) to pull consumption forward or acquire something today for which they otherwise would have to wait. When the primary objective of fiscal and monetary policy becomes myopically focused on incentivizing consumers to borrow, spend, and pull consumption forward, there will eventually be a painful resolution of the imbalances that such policy creates. The front-loaded benefits of these tactics are radically outweighed by the long-term...

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16/5/19: Identifying Debt Bubble 4.0

Having just posted on the debt supercycle-related comments from Gundlach (https://trueeconomics.blogspot.com/2019/05/16519-gundlach-on-us-economy-and-debt.html), here is a chart identifying these super-cycles in the U.S. economy: The periods of significant leverage in the U.S. economy have been identified as follows:First, I took nominal GDP growth rates (q/q) snd nominal total non-financial debt growth rates (also q/q) for the entire period of data coverage for which all data points are...

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16/5/19: Gundlach on the U.S. Economy and Debt Super-cycle

U.S. growth over the past five years is based “exclusively” on government, corporate and household debt, according to Jeffrey Gundlach, chief executive of DoubleLine Capital, as reported by Reuters (link below). This is hardly surprising. In my forthcoming article for Manning Financial (in print since last week), I am covering the shaky statistical nature of the U.S. GDP growth figures, and the readers of this blog would know my view on the role of leverage (debt) in the real economy as a...

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Technically Speaking: The Drums Of Trade War – Part Deux

In June of 2018, as the initial rounds of the “Trade War” were heating up, I wrote: “Next week, the Trump Administration will announce $50 billion in ‘tariffs’ on Chinese products. The trade war remains a risk to the markets in the short-term.” Of course, 2018 turned out to be a volatile year for investors which ended in the sell-off into Christmas Eve. As we have been writing for the last couple of weeks, the risks to the market have risen markedly as we head into the summer months. “It is a...

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Technically Speaking: “‘Trade War’ In May & Go Away.”

Over the weekend, President Trump decided to reignite the “trade war” with China with two incendiary tweets. Via WSJ: “In a pair of Twitter messages Sunday, Mr. Trump wrote he planned to raise levies on $200 billion in Chinese imports to 25% starting Friday, from 10% currently. He also wrote he would impose 25% tariffs ‘shortly’ on $325 billion in Chinese goods that haven’t yet been taxed. ‘The Trade Deal with China continues, but too slowly, as they attempt to renegotiate,’ the president...

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Has The Fed Done It? No More Recessions?

“Wow!” That is all I could utter as my brain spun listening to an interview with Chamrath Palihapitiya on CNBC last week. “I don’t see a world in which we have any form of meaningful contraction nor any form of meaningful expansion. We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there’s a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality...

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22/4/19: At the end of QE line… there is nothing but QE left…

Monetary policy 'normalization' is over, folks. The idea that the Central Banks can end - cautiously or not - the spread of negative or ultra-low (near-zero) interest rates is about as balmy as the idea that the said negative or near-zero rates do anything materially distinct from simply inflating the assets bubbles.Behold the numbers: the stock of negative yielding Government bonds traded in the markets is now in excess of USD10 trillion, once again, for the first time since September...

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Reality Vs Fantasy: What To Watch For This Earnings Season

Just recently, David Robertson ran an article discussing the deviation which has grown between “fantasy” and “reality” in the investing markets. “The phenomenon of extreme differences is also increasingly appearing in financial numbers, which are the life blood of markets. Andrew Smithers conducted research on the usefulness of accounting numbers and his work was summarized by Jonathan Ford.  ‘Corporate data now provide worse information than before.’ The ironic consequence of all this is...

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The Message From The Jobs Report – The Economy Is Slowing

Last week, the Bureau of Labor Statistics (BLS) published the March monthly “employment report” which showed an increase in employment of 196,000 jobs. As Mike Shedlock noted on Friday: “The change in total non-farm payroll employment for January was revised up from +311,000 to +312,000, and the change for February was revised up from +20,000 to +33,000. With these revisions, employment gains in January and February combined were 14,000 more than previously reported. After revisions, job...

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