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Flow Of Funds Update: Aborted Attempt To Hand Over Releveraging From Government To Business Sector?

Tyler Durden's picture




 

We have complete the cursory first run of the just released quarterly Flow of Funds (Z.1) updated for Q1 2011. While we will present the far more important breakdown of the shadow economy, we first focused on the key asset and liability data covering the household, corporate and government sectors, which presented few surprises. In summary, total household net worth increased by $1 trillion from $57.1 trillion to $58.1 trillion in the 3 months ended March 31, 2011. This the highest level of household net worth since Q2 2008 when it stood at $60 trillion, and still down substantially from the all time high of $65.7 trillion in the summary of 2007, or the peak of the credit bubble. Looking at the asset components we see once again just why Bernanke is so focused on pumping up the Russell 2000: the stock market (through holdings of corporate equities, mutual fund shares, and pension fund reserves), accounted for $1.2 trillion of the $1.0 trillion increase. This paper profit was offset by a $349 billion drop in mortgage equity, which declined to $18.1 trillion, the lowest in almost a decade. Additionally, household deposits increased to the peak level of $8 trillion once again, which is explainable since household liabilities declined with a drop in both mortgage ($68 billion) and consumer ($31 billion) debt. In a nutshell the consumer continues to delever. But probably the most surprising move was the substantial drop in the positive contribution to total debt from state and government debt. Coming in at $9.6 trillion, total government debt outstanding, rose by the lowest amount since Q2 of 2008, courtesy of a modest increase in Federal Government debt of $184 billion and an actual decline in state and local government debt of $18 billion.

The offset to this gradual phase out of the government was the increase in non-financial business debt, which increased at a 4% SAAR rate, the highest since Q3 of 2008. In other words, just as the government was preparing to handover the releveraging baton to corporate America the economy appears to have stalled. The biggest wildcard thus is whether in absence of Consumer releveraging, and the phasing out of the government debt, whether Corporate America can continue to be the key driver of economic growth.

The household balance sheet:


Household debt:


Non-financial business debt - will the SAAR increase sustain?


Government debt - slowest rate of increase in 3 years


And the ongoing drop in household real estate assets:

 

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Thu, 06/09/2011 - 13:34 | 1354986 Racer
Racer's picture

So this increase in net worth was basically the rich 1% got even richer whilst the poor got even poorer

Thu, 06/09/2011 - 14:11 | 1355128 Village Smithy
Village Smithy's picture

Yes, especially if you are an ambitious poor person whose biggest, and probably only, asset is their home. You can watch it's value fall by 25% over the next 5 years while the russel gets infinite transfusions.

Thu, 06/09/2011 - 16:33 | 1355565 LowProfile
LowProfile's picture

Poor people own houses?

Thu, 06/09/2011 - 14:18 | 1355152 A_MacLaren
A_MacLaren's picture

And the middle classes were bent over a barrel.

Thu, 06/09/2011 - 13:38 | 1354989 RockyRacoon
RockyRacoon's picture

... the stock market (through holdings of corporate equities, mutual fund shares, and pension fund reserves), accounted for $1.2 trillion of the $1.0 trillion increase.

Ah, the new math.  Gotta love it.  

Thu, 06/09/2011 - 13:41 | 1355010 SheepDog-One
SheepDog-One's picture

Hey 220, 221, whatever it takes!

Thu, 06/09/2011 - 13:47 | 1355026 bbq on whitehou...
bbq on whitehouse lawn's picture

State workers get pensions, mutual funds and other gravy.

The US steals from other countries and gives to state workers. If you are trying to operate a business outside government in the US you will not do well.

All US businesses are now government dependent.

Empire has is blessings and its curses. Make sure your on the blessing end of the stick.

Thu, 06/09/2011 - 14:05 | 1355089 topcallingtroll
topcallingtroll's picture

I like the fact we get a subsidy from most of the world.

Bend over China!

However i do hate the usa government dependency of people and businesses.

Thu, 06/09/2011 - 13:52 | 1355029 Cthonic
Cthonic's picture

Symbolic trust is no Lie algebra.

Thu, 06/09/2011 - 13:36 | 1354994 RobotTrader
RobotTrader's picture

Yep, despite the gargantuan deficits....

- Gold rallied early this morning then collapsed like a cheap suit

- 30-yr. Uncle Gorilla loans were snapped up at a paltry yield of 4.2% as demand for paper is simply voracious.

Thu, 06/09/2011 - 13:45 | 1355005 SheepDog-One
SheepDog-One's picture

Gold 'collapsed' today up $4 at $1,542? Tell Uncle Gorilla to stop putting the booze in your sippy cup and molesting you.

Thu, 06/09/2011 - 13:56 | 1355047 bbq on whitehou...
bbq on whitehouse lawn's picture

Gold is an asset held outside of the US government.

Thats means support of over 5billion people. Now US/EU government will still benifit those inside the empire as your "pigmen" are. Still its not the full market.

Your pigman will do well and if you follow them you will also do well but 5billion with nothing vs 2 billion with everything. Ill place my bets with the have nothings.

Because that the place for "growth".

LOL.

Smile have fun but know only those with nothing will ever give you somthing for nothing.

Thu, 06/09/2011 - 14:08 | 1355101 topcallingtroll
topcallingtroll's picture

Very true.

My bets are on the third world in my long term accounts.
Spec accounts are still cash.

Thu, 06/09/2011 - 13:58 | 1355068 topcallingtroll
topcallingtroll's picture

I am calling for a sub 4% thirty year.

Thu, 06/09/2011 - 14:06 | 1355110 bbq on whitehou...
bbq on whitehouse lawn's picture

I have a 6+ EE somewhere kicking. As do many others. So while the new debt may be cheap its old debt keeps on ticking.

Thu, 06/09/2011 - 14:17 | 1355137 topcallingtroll
topcallingtroll's picture

Smart man!

Thu, 06/09/2011 - 13:37 | 1354996 trav7777
trav7777's picture

All you have to do is look at that wealth inequality chart on the other page to know that the Bernank cannot afford to lose the "next 9%."  The next 9% is who has all their wealth in equities and 401ks and shit like that.

When the trade classes turn, mfers get hanged.

Thu, 06/09/2011 - 13:47 | 1355019 SheepDog-One
SheepDog-One's picture

The 401K bathrobe brigades are about to get slung upside down. If theyre robbing federal employee pensions of $80 billion, no sweat robbing the public pensioners.

Thu, 06/09/2011 - 14:24 | 1355157 trav7777
trav7777's picture

No...because this is the recipe for revolution.

The vast masses have no wealth, they are a group nobody cares about.  They are easily subjugated and led and pacified.

The trade classes are who wield the real political power in a crisis, because they are the ones who DO shit and they outnumber the true rich.  Doctors, lawyers, pilots, engineers, etc.  They stop working and everything stops.

The trade classes always lead the revolution.

Thu, 06/09/2011 - 13:51 | 1355043 topcallingtroll
topcallingtroll's picture

I am so conflicted!

I want to help hang bankers and senior bondholders who got bailed out, but do I have to lose my 401k first?

Thu, 06/09/2011 - 14:16 | 1355131 bbq on whitehou...
bbq on whitehouse lawn's picture

Your 401k is "safe" as in congress will not move against it. But as its market based congress has other ways of messing with it.

Sure that 401k will always be under your control its how that control is allowed that may get strange.

401k is fine but its value is not. You can get more value if you cash it into gold bullion or even silver bullion. But if you are fine with your control over it and its performance, then dont touch it.

Its fine as is, if your happy with it.

Thu, 06/09/2011 - 14:26 | 1355161 SheepDog-One
SheepDog-One's picture

What? Treasury has already planned to 'annuitize' 401K's, and gotten congress approval. Youre a FOOL to sit on a 401K and deem it 'safe'! Sorry!

The Treasury Is Soliciting Your Feedback Regarding The Proposed Annuitization Of 401(k) | zero hedge

Thu, 06/09/2011 - 15:36 | 1355413 MarketTruth
MarketTruth's picture

Your 401k IS NOT safe at all. If you think otherwise than you are a fool.

Thu, 06/09/2011 - 13:52 | 1355031 topcallingtroll
topcallingtroll's picture

Who says there is no difference between political parties.

Republicans are hell bent on cutting government expenditures and.cutting taxes. We are intent on zeroing out certain bureaucracies. I wish we could find a majority for a massive cut in military spending too.

Bernanke knows government spending will not provide meaningful stimulus with tea party republicans in charge.

Thu, 06/09/2011 - 13:54 | 1355038 SheepDog-One
SheepDog-One's picture

'We'? What are you supposed to be, the 'democrat party'? Give me a break take that ridiculous bullshit to Yahoo! message boards.

Thu, 06/09/2011 - 13:58 | 1355057 topcallingtroll
topcallingtroll's picture

I consider myself mostly tea party republican. We republicans want to make massive cuts in government taxes and transfer payments.

There is a difference between parties which is why bernanke knows there will be no meaningful stimulus from increased deficit spending as long as republicans are in charge of the House.

Thu, 06/09/2011 - 14:14 | 1355138 LawsofPhysics
LawsofPhysics's picture

"massive cuts in government taxes"  "There is a difference between parties which is why bernanke knows there will be no meaningful stimulus from increased deficit spending as long as republicans are in charge of the House."

Sure, that must be why the republicans are going to bring ALL troops home and block a vote on the debt ceiling. < sarc off >

Go back to a MSM blog, idiot.

Thu, 06/09/2011 - 14:21 | 1355148 topcallingtroll
topcallingtroll's picture

Hehehe.

Democrats want to increase taxes and.spending. republicans want to cut both. That is a big difference. Admit it!

Well... big enough difference for me to get out and vote.

Thu, 06/09/2011 - 14:26 | 1355163 mynhair
mynhair's picture

You go, TCT!  Don't forget to campaign for a decent candidate.

Thu, 06/09/2011 - 14:25 | 1355169 SilverDosed
SilverDosed's picture

:facepalm:

Thu, 06/09/2011 - 14:29 | 1355187 LawsofPhysics
LawsofPhysics's picture

Bullshit troll, I have not seen an earnest effort by either party to cut spending.  What, are you talking about that 90, wait 60, wait 30, wait 15 billion dollar cut proposed by the republicans?  Just like yourself, it's laughable.

Thu, 06/09/2011 - 14:44 | 1355243 NotApplicable
NotApplicable's picture

Those are just words, TCT. The accompanying actions are a complete disconnect from them.

As long as you vote, then you ARE the problem, as you vote for better sounding lies, that's all.

I mean, look around. the disconnect is everywhere. Here's an example I like to use.

Who implemented life-time welfare limits? Clinton.

Who implemented a federal prescription drug plan, creating the largest single increase in welfare ever? GWB

Who's started illegal wars? Every US President in my lifetime.

If you haven't noticed, the words and acts of these people are highly divergent. Yet you are betting your life on them.

Thu, 06/09/2011 - 14:48 | 1355275 trav7777
trav7777's picture

Are you fuckin stupid or were you asleep for 8 of the past 10 years?

Thu, 06/09/2011 - 14:21 | 1355159 mynhair
mynhair's picture

"and transfer payments"

Miss your UE filing this week?

Thu, 06/09/2011 - 14:24 | 1355168 SheepDog-One
SheepDog-One's picture

'We Republicans' blah blah dancing on the head of a pin about 'BIG DEALS' such as 1% tax cut for years....ridiculous boob bait for the sheeple.

Thu, 06/09/2011 - 14:48 | 1355268 RockyRacoon
RockyRacoon's picture

Republicans want to dissolve certain gov't bureaus, etc., but then whine about the UE rate.   If I recall correctly the last employment report showed approx 45K reduction in gov't employees.   Can't have it both ways!   If you cut gov't, you increase UE.   How does the "party" get around that little snag?   The Postal Service pays people to sit around doing nothing in an empty room due to "the rules".   If the military is brought home from all the foreign bases we will have to pay them to prune base/post shrubbery with pinking shears to keep 'em busy.   As they are discharged we'll have to build more interstate overpasses for them to live under.   Now there's an infrastructure project both "parties" can get behind!

Hey, don't get me wrong, I despise both parties.   It's the inability to perform simple math that amazes me.

I just contributed to Ron Paul's campaign.

Thu, 06/09/2011 - 14:23 | 1355153 bbq on whitehou...
bbq on whitehouse lawn's picture

"Who says there is no difference between political parties."

Well non of the political parties are for you.

All parties are the same because none are for you.

Thats what makes them the same.

Just because your interest line up with some other privileged client on "one" issue doesn't make the party R/D on your side.

Lot of issues out there most will not be for you. Picking one or two issues you like is not the same as getting 80%-90% of your issues covered.

Your still getting hosed just not on the one or two issues you remember.

Thu, 06/09/2011 - 15:58 | 1355477 lizzy36
lizzy36's picture

Yes. The republicans are awesome.

I am voting for Palin only if her running mate is god.

PALIN/GOD 2012.

Thu, 06/09/2011 - 13:48 | 1355033 SheepDog-One
SheepDog-One's picture

Amazing! We're $28 trillion in the hole in just the last couple years, yet 'net worth' is actually up! MAGICAL! I think Im goin shopping at Tiffany's!

Thu, 06/09/2011 - 14:46 | 1355253 NotApplicable
NotApplicable's picture

That's because holes have value.

Thu, 06/09/2011 - 14:53 | 1355281 RockyRacoon
RockyRacoon's picture

Newt could give you some shopping tips.

Thu, 06/09/2011 - 13:57 | 1355048 Franken_Stein
Franken_Stein's picture

 

BILDERBERGER NEWSFLASH

from Basler Zeitung (Basel newspaper)


Privat-Jets konnten an der Bilderberg-Konferenz nicht landen

(Private jets couldn't land at Bilderberg conference)

 

Das Wetter machte den Teilnehmern der geheimnisumwitterten Bilderberg-Konferenz in St. Moritz einen Strich durch die Rechnung: Sie konnten nicht per Flugzeug anreisen, sondern mussten mit der Limousine vorlieb nehmen.

 

Bad weather compromised the neatly worked out schedule of the participants of the secretive Bilderberg conference in St. Moritz:

They weren't able to arrive by plane and had no choice but to go by limousine.

 

http://bazonline.ch/schweiz/standard/BilderbergTreffen-eroeffnet--SVP-un...

 

Thu, 06/09/2011 - 14:49 | 1355263 NotApplicable
NotApplicable's picture

Ride in a Limo? The horror!

Hopefully the police have cordoned off the route, otherwise they might become traumatized by having to experience traffic for the first time.

Thu, 06/09/2011 - 14:00 | 1355062 AldoHux_IV
AldoHux_IV's picture

Odds don't look good that corp america will lead the way-- unless you quadruple min wage that corps like MCD would have to pay it's employees. Payroll tax cuts I'm sure will be very appealing to companies that are spread thin on margins as is-- unless the CME can ban all speculators via 100% margin increases and allow for the centrally planned policymakers determine the winners and losers month to month.

Thu, 06/09/2011 - 14:04 | 1355083 The Heart
The Heart's picture

The criminal COVER-UP of the Fukushima radiation and failures are coming out.

http://www.youtube.com/watch?v=9g3Pejmigkg

People must shine the light on the total shortcomings of the EPA/FDA/UN/NILU/NRC to protect and warn the people of the US and other countries about the hazardous radiation that is daily getting worse. It is a harsh day in Arizona, New Mexico, and Colorado today with heavier then usual amounts of radiation coming down on the entire area.

What is also not being mentioned is the UV index in the New Mexico region that is the highest in the nation. It is past the maximum level of 11 and for days has been 12, which causes skin damage after ten minutes.

http://www.cpc.ncep.noaa.gov/products/stratosphere/uv_index/uv_current_m...

What is urgently needed is the proper monitoring animations and plume models of the fallout clouds like the ones the NILU were doing before being ordered to stop. At least then people can know which areas and days are heavier than usual and have the foresight knowledge to warn them to stay indoors on those days like today.

 

 

Thu, 06/09/2011 - 14:54 | 1355286 NotApplicable
NotApplicable's picture

I'm curious, why is a high UV day bad for Fukushima emissions? Wouldn't that mean the air is clearer of particles than otherwise?

I was under the impression that it condensed in the clouds, then falls to the ground during preciptation.

I think you're confusing UV radiation exposure with the dangers of soil contamination (and ultimately, internal exposure).

Thu, 06/09/2011 - 14:05 | 1355102 rfullem
rfullem's picture

ah yes, the flow funds report. I referenced this fine item before I bought a house (2007). Did you know that 85% of a family's debt is tied to housing and about 35-40% of the assets. So I said "clearly, the PHDs at the Fed must know that a 20% drop in home prices would be catastrophic to the average family's balance sheet not to mention ruin the multitrillion dollar mortgage banking business and crush muni finances." Oh. they didnt know? Ah. guess they had not time as thet worked on papers like "Using Genetic Algorithms to Model the Evolution of Heterogeneous Beliefs" and they still are employed?

Thu, 06/09/2011 - 14:51 | 1355288 trav7777
trav7777's picture

I sold my house and now have 0 debt.  Fuck it, I'll stick with renting or eventually just squat in a REO.

Life is getting to where you need to implement the Heat Rule or else your ass is in the wind

Thu, 06/09/2011 - 14:52 | 1355277 Bam_Man
Bam_Man's picture

They need to figure out a way to "POMO" houses.

Seriously.

Thu, 06/09/2011 - 15:10 | 1355305 NotApplicable
NotApplicable's picture

They already did, in the form of $917,856,000,000 worth of RMBSes (as of June 2nd).

Thu, 06/09/2011 - 14:53 | 1355280 slewie the pi-rat
slewie the pi-rat's picture

the slowdown showdown.

shutdown, BiCheZ!

Thu, 06/09/2011 - 15:39 | 1355423 bbq on whitehou...
bbq on whitehouse lawn's picture

No; grandmother. But thats a tale thats longer and more tragic then i care to coment on.

Elites; there were, some of noble and tragic character. Like the british king that gave up the thrown for his true love. Such tales are not only in story books.

 

Thu, 06/09/2011 - 16:48 | 1355639 pitz
pitz's picture

Re-leveraging in the private sector = massive dividend increases? 

Because there sure as heck aren't any 'investments' in plant or machinery worth making right now.

 

Fri, 06/10/2011 - 01:29 | 1357036 Wampeter
Wampeter's picture

I am not clear whether the drop in the rate of increase in government debt includes the funny accounting the treasury has done to remain under the debt ceiling or have they just taken the debt ceiling amount at face value?

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