Total Debt + Equity = USA Bubble #1

Tyler Durden's picture

Most of the time, when economists or Wall Streeters present a continuum of who's worst (or best) in the world, they show just a part of the whole: whether it is total sovereign (public) bonds, total corporate bonds, securitized or non-securitized bank loans, or in some cases, equities, as a percentage of the host nation's economic output, or GDP. The reality is that all these are merely a part of the greater whole, and showing one independent of the others tells at best a small part of the story. For the full picture one always needs to show how all these add up combined to get what in corporate finance is known as "enterprise value", and what in economics McKinsey has dubbed "financial depth" or the value of the world's financial assets relative to GDP. It is here that it is clearest and most visible just how extensive the "bubblification" of the US capital markets - both debt and equity - has been, even despite the relative drop in consolidated "financial depth" in the past five years.

In short: think US is the biggest financial bubble in the world? You are right.

And for those who say there is still a long way to go before the global bubble - the consolidated global bubble, including equity and debt, is reflated back to 2007 levels, guess again - we are now at a new all time high of "financial depth."

Finally, while everyone is bombarded every single day with news that the global stock market is back to "all time highs", what virtually nobody knows is that when expressed as a percentage of global GDP, which in turn is driven entirely by new debt creation mostly by central banks, global equities as a % of global GDP are now 40% lower than their previous high achieved back in 2007!

Those who are familiar with the simplest concept in all of finance - Enterprise Value - will understand why in an environment of imploding free cash flow such as the current one, this is bad to quite bad.

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l1b3rty's picture

This bubble is quite elastic! Like a condom! Just as good at preventing life too.

Quinvarius's picture

The gold rally has not even started yet. You are flipping crazy if you are not buying this dip.  They are adding as much money to the base money supply as existed in 1980 every 3 months.  And with a 16 trillion national debt, they are going to be printing a whole lot more.

All Risk No Reward's picture

The debt is growing faster than base money.

They aren't growing base money to make the debt payable.

The entire purpose of the debt is to be unpayable - that's how the international banking cartel criminals seize control of your nation without firing a shot.

If they aren't trying to pay off the debt with all this debt issuance (it isn't money printing), what are they doing?

One has to understand the nature of money - it has two faces.  One side is the asset side which consists of bank credit and physical money.  The other side is the liability side - the principle and interest owed in order to create that asset money.

The international banking cartel is seizing the asset face of money from society while offloading the liability face of money onto society.  If it a financial coup - quite literally.

You can't pay back unpayable debts by issuing more debt - that's as absurd as saying you can outrun a scooter that is programmed to drive 1 MPH faster than you are running at any given point in time.

It's likie saying one can extinguish their credit card debt by borrowing more from another credit card - absurd.

The false "money printing" meme has fooled many a person.

If you were Dr. Evil and had trillions in debt ownership, trillions in the asset side of money and were doling out 3% 30 year loans, would you inflate the currency away?

I wouldn't.  I'd steal all the asset money and dump all the liability money I could while lying to the sheep to get them to buy all my assets at top dollar and then I'd pull the plug.

Everything crashes, but I wouldn't care because my front corporations are TBTF&Jail and my operatives are in government to protect me and mine.

My competition, though, would be wiped out so I could buy them up for pennies on the dollar.

My trillions in debt ownership would be there so I could foreclose on people and turn my paper into the physical reality - the entire point of the criminal debt money system from its inception.  Those that don't know this simply are not illuminated, so to speak.

Whatever isn't mortgaged and driven into bankruptcy, I would buy with the trillions I looted from the arrogant chumptocracy...  those who were unable to grasp the obvious conclusion once one actually did real research instead of picking international banking cartel option 1 or international banking cartel option 2.  You won't hear reality on TV - so don't look there.

Once I rolled up reality under my mega corporate fronts and society is left destitute, then I'd give you that hyperinflation you want so dearly...  but it won't matter - you'll be destitute and I'll own the Earth, so Debt Money Tyranny is no longer needed once its purpose was served.

The good news is the solution to whatever scenario unfolds is the same.

1. Learn how the mind is supposed to work and operate independently and then implement active literacy in your life.  The Trivium is an excellent starting point:

2. Gain control over the essential of life.  Direct control.

3. Build community of like minded people.

4. Expose the criminals running this operation.

A PDF is linked - view it, understand it and then forward it to your email list and let them know the monetary system is a fraud and the enclosed link exposes the detailed mechanics of the fraud.

You are the resistance, like it or not, and you rely on your fellow man and woman, like it or not.  If everyone rolls over or swims a pool of apathy, we all get the boot on our neck for eternity.

All Risk No Reward's picture

>>Which are the ‘Too Big to Fail’ Banks?<<

How about the mega banks that cotnrol the Federal Reserve and whose operatives sit on the Board of Directors?

Can you say, "corrupt" and "incestuous?"

I thought you could.


azzhatter's picture

this morning i watched cnn with candy crowley. in the corner of the screen it said stinkhole update. catchy name for her show

Diogenes's picture

We don't use the term "elastic currency" anymore. It sounds too much like "rubber check".

Eireann go Brach's picture

But but iBama said on meet the press that the stock market is at all time highs so everything is fixed, while Michele was in the background with Beyonce, Flavor Flav, Jwho and Jballsack drinking Dom and Cristal!

sunnyside's picture

That's his next cabinet.  Get the mental picture of Flavor Flav running the Treasury...

SelfGov's picture

So what you're saying is that the economic collapse roller coaster is now half over the peak and gravity is about to start helping?

Matt's picture

Sarah Palin: " ... If we can’t stomach modest cuts that would lower federal spending by a mere 0.3% per year out of a current federal budget of $3.6 trillion, then we might as well signal to the whole world that we have no serious intention of dealing with our debt problem.

If we are going to wet our proverbial pants over 0.3% in annual spending cuts when we’re running up trillion dollar annual deficits, then we’re done. Put a fork in us. We’re finished. We’re going to default eventually and that’s why the feds are stockpiling bullets in case of civil unrest. ..." /from her facebook page, posted on Feb 26, 2013

SelfGov's picture

It scares me that I agree with that woman on some issues.

lolmao500's picture

A viral video making the rounds about US wealth inequality...

CheapBastard's picture

Wow! Impressive visual presentation.

HD's picture

Most ZHers know this information well, but this is great to send to friends and family. Thanks for the link.

e-recep's picture

a very well done presentation. but the scum politicians are missing from the picture. somehow they should be included.

Totentänzerlied's picture

You can't implicate the politicians without implicating the voters, and a golden rule of rhetoric is don't attack your audience.

Law97's picture

Aweome video.

And now the Republicrats have the middle class turning on itself, blaming all those greedy teachers, policemen, and government workers. 

121% of the recovery gains since 2008 have gone to the top 1%.  Follow the money.

Law97's picture

Government-forced wealth redistribution is theft...even when it it is to the top 1% from everyone else. 

Thank you Federal Reserve, the most wildly successful wealth redistribution mechanism is the history of man.

Mike Shedlock comments on the study I linked to above.

Radical Marijuana's picture

"Thank you Federal Reserve."

Yes, the wealth distribution in that little video is the result of the supreme form of "wealth" being legalized counterfeiting by private banks, which then drove everything else to become runaway fascist plutocracy. Of course, now that 90% of the public gets their "news" from a handful of huge corporations, which, in turn are in debt to the banksters, there is NOTHING practical that can be done about this runaway social insanity situation. It must automatically get worse, faster, until its madness destroys itself ...

Thank you Federal Reserve for destroying the future!

MisterMousePotato's picture

You're wrong, l97. Maybe you're a government union employee shill? I dunno.

But ignoring for the moment the current, ongoing outrageous salaries, perks, vacations, work rules, etc. of .gov.union employees, we are on track in the United States to pay more money to 20 million public sector retirees – at an average pension of $65,000, we will pay these retirees $1.3 trillion per year - than we will be paying in social security to 80 million private sector retirees – at an average social security benefit of $15,000 per year that will cost less, about $1.2 trillion per year. Providing a level of retirement security to government workers that only the wealthiest 1% can enjoy in the private sector is not “protecting the middle class,” it is economic enslavement by government unions over the taxpayer.

Law97's picture

I'd like to see where you get your figures from.  Federal pensions (and we are talking federal-federal comparisons particularly since you brought up social security) are only $70 billion per year. I'm not saying there isn't waste and some pensioners receive far more than they deserve, but federal pensions are a drop in the bucket compared to other wasteful spending.  At least most of these pensioners did *something* over their lives to earn those benefits, like go fight on a couple of wars, for starters.

I'm not a government union shill, btw.  I'm just someone who feels compelled to stand against the divide-and-conquor strategy the government and elites are using against us.  That you have bought into the hype, shows that, unfortunately, it is working. The fact that you got three up arrows shows there are others on here that want to believe this kind of misinformation...confirmation bias anyone?  You were only off by an order of 17x or so on your pension estimate, so maybe I should cut you some slack.


An August 2012 report by USA Today:

"USA TODAY analyzed the Civil Service Retirement System database, obtained under a Freedom of Information Act request. The Office of Personnel Management withheld some information, including names, ages and length of service.

The records cover 1.9 million federal civilian pensions. Congress members were not included, nor were military retirees.

The average federal pension pays $32,824 annually. The average state and local government pension pays $24,373, Census data show. The average military pension is $22,492."

Totentänzerlied's picture

"blaming all those greedy teachers, policemen, and government workers."

Who vote for MOAR free shit, every election. Coincidence?

rustymason's picture

Thanks, lolmao500, for showing what Fascism/Marxism has done to America.

Radical Marijuana's picture

NO, rustymason, your analysis is too superficial! Fascism/Marxism were both tools used by plutocracy.

More importantly, the "wealth" of that plutocracy was gained through the fraud of being able to make "money" out of nothing.

It is ALL organized lies, operating organized robberies, and can not be anything else. The only genuine solutions would be to change the dynamic equilibria between those. Tragically, those are changing NOW, towards runaway triumphant financial frauds, eventually destroying the whole system!


Teamtc321's picture

Silver Bitcheez!


Dr. Krugman, you just keep rubbing your tungsten.

Crash Overide's picture

These days, if you don't hold it you don't have it...

When I watch my nephew blow bubbles they always pop.

*toilet flush*


Temporalist's picture

When seasonally adjusted for fascism these numbers look much better.

HD's picture

"Buy the dip" has become "buy the bubble".

Tick-tock on the hopium clock...

CheapBastard's picture

"Mr Bernank, tear down that Bubble!"

HD's picture

Paul Krugman responds:

   "Print one for the Gipper"

wisefool's picture

The movie Diehard explains it all. "You ask for the impossible, I give you the IRS" Nowhere else in the world runs on a WWII tax code, with christian guilt and Kstreet.

ParkAveFlasher's picture

That's no bubble, that's horsemeat!

GMadScientist's picture

The credit card company said I could write those "checks" for anything I want.

"Baby needs a new pair of shoes!"

caimen garou's picture

at least we are #1 at something! it's good to be king, right benny?

orez65's picture

Soon to be: 'My kingdom for horse meat'

Lord Of Finance's picture

Yeah. Global equities are about 40% lower compared to 2007. 


   AND, interests rates are about 5 times lower here in the US since the last time the DOW/S&P were at these levels in 07. 


These academic assholes are a clueless and demented lot.

kraschenbern's picture

You just don't understand!  The objective the assholes are working to is: maximize GDP.  GDP is a $ measure of annual circulating debt.  It is being maximized; we should be happy.  /sarc off

q99x2's picture

Jamie Demon stole the US gold reserves to buy an island. Bernanke helped him. Arrest them.

disabledvet's picture

"and how do they do it" you ask? " and get away with it" is what i mean of course. obviously it's not with "paens to Enterprise Value." THIS is how you "rob the economy at large to pay yourself": the idea of "mass consumption" is something invented by Banks and promulgated by the media..."a theory of wants, needs and desires...writ large." trust me when i tell you...this theory is OUT THERE. it can be summed up by the expression created in the 90's of "better, faster, cheaper" and it is the reason why what you see going on is not a figment of your imagination but feels "in fact real." there is no greater power in the world than "made to believe truth" and that's why the first area to be "mass consumed" was the media itself. by "writ large" i mean "lets talk bread. let's talk beer. let's talk computers and cell phones." all these things "exist" not as an actual number (ultimately) but as a "plan for ubiquity." it's greatest expression is the Apple "I-phone" and that's why if you don't read Karl Marx "you're not getting it." Unlike Marx himself (who was quite down on his theories...and rightfully so) this isn't true of New York and New Capitalism. "once they killed God anything was possible." there was always the "slight" problem if "financing said theory"...but this was "accomplished" via securitization of debt...something along with equities i take note is also "acting as a functional derivative only in reverse." in in the form of MONEY is in fact SHRINKING. thus not only must we ask "from whence consumption" given the collapse but "whence the FINANCING of said consumption" both present and FUTURE??!!!! and let me answer that question for you: GOVERNMENT. so while i coined the term "Securitization and its Discontents" what i really should be talking about is MONETIZATION and how "this only creates more Government DEBT" which acts like a lead weight on any incipient or even perceived recovery. apologize for being so abstract here...the whole thing is a real bear for me to wrap my mind around. "with derivations" of course. i would categorize the current "theme" as "high end Sovietski" since even the State itself is being financed "in THEORY." the DEBT is the only thing in ACTUALITY being financed! no wonder Wall Street "took off right out of the gates." if the only Government you have to worry about is one that only services its debt...well, we don't have much a Government do we? Which simply BEGS the question..."how's the economy doing?" because it is THOSE theories that are "financing everything." trust me when i tell you..."there is no ubiquitous theory of economics." that's why not even GOLD seems to be working under this scheme since "if it doesn't exist for buyers of significance" (Germany comes to mind) nor is used as part of "ordinary" or "regular" life "then the pricing function ceases to become a function of inherent value." (go talk to your local jeweler and ask them how sales are doing.) not saying i'm right...if i am it will be noticed/obvious to all. to me these are CLASSIC symptoms of a DEFLATION. from "i can't get it at the price i want" to "these prices are too low. there is no value here and i'm incurring a debt to buy it" might seem pretty minor...but how many things in our lives do we say "boy, i'll be paying for this forever" to? i would argue THAT form of ubiquity is on the verge of becoming...PERVASIVE. my solutions have of course been anything but academic: natural gas, cloud computing systems, solar tech, 3 dimensional printing. they ALL share a similar trait now as well (been spouting this going on 4 years now save for the 3 d printing) namely prices have FALLEN dramatically. it's all "cut from the same cloth" though...simply put "the only financing scheme for Government debt that works is a growing economy." PERIOD. so now it's "blame the lack of Big Spenders" yada yada yada. I say "their theory has some problems" and THAT'S the problem...not anything Congress should (like exercising OVERSIGHT) or should not be doing.
here's the Bobby "bland" version:
and the Eric Clapton version: i'll let you all judge for yourself which one is better.

CaptainSpaulding's picture

Equity... Does that mean money?

GMadScientist's picture

"with news that the global stock market is back to 'all time highs', what virtually nobody knows is that..."

Nominal gains are about as useful as being the world's tallest midget.

Crash Overide's picture

I feel like a broke record when I say "the writing is on the wall"...

How's you're hedge?

Temporalist's picture

It's a good thing most people don't read too good see.  Ignorantz is blips.

GMadScientist's picture

Would like to know the distribution of that -37 percentage point change across the assets classes; I'd guess those reductions were heavily skewed towards the (non)securitized loan portion.