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The System is Now MORE Leveraged Than It Was in 2007
A popular theme in the financial media is to talk about deleveraging.
We don’t see it. The alleged “deleveraging” that began in 2007 is barely a small dent in an otherwise hockey stick growth curve in credit instruments.
Here’s a closeup of the alleged period of “deleveraging.” Does this look like a cleaning house for the financial system? We didn’t even unwind $2 trillion… less than 4% of the credit instruments that existed at the time.
Why is deleveraging so terrifying to the Fed?
Take a look at this chart comparing total credit instruments to the Gross Domestic Product. If anything shows how absurdly leveraged the US financial system has become, this is it.
Things were relatively normal until the 1990s at which point debt/ credit began to grow exponentially.
It’s not as this bubble of debt was buying rapid economic growth either.
· In the 1960s every new $1 in debt bought nearly $1 in GDP growth.
· In the 70s it began to fall as the debt climbed.
· By the time we hit the ‘80s and ‘90s, each new $1 in debt bought only $0.30-$0.50 in GDP growth.
· And today, each new $1 in debt buys only $0.10 in GDP growth at best.
Put another way, the growth of the last three decades, but especially of the last 5-10 years, has been driven by a greater and greater amount of debt. This is why the Fed has been so concerned about interest rates.
Have we reached the end of this debt-fueled bubble? Looking at that chart compared to other bubbles (2000 Tech bubble, the current Biotech bubble), we have not quite reached escape velocity just yet. But we're getting close.
The Fed managed to pull a rabbit out of a hat last time... by resorting to extraordinary policies. In doing so, it's used up most of its ammo. So there's no telling what will happen if we get another systemic deleveraging again.
This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.
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Best Regards
Phoenix Capital Research
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Does a debt instrument mean I owe money on my Tuba?
Financial Armageddon Awaits and no one will be left unscathed.
new iPhone in September...problem solved.
As the FED says, " New Iphones cost less and taste better, with a side order of NO inflation."
The most amazing single fact of all; ?? United States 90% Silver currency; quarters and dimes is still available and can be purchased. At a minimum this represents a savings account that won't evaporate or devalue itself to insignificance. The only alternative is to be one hell of a commodities trader and keep making money faster than they devalue it. Not especially easy to do.
Okay , so how the fuck can you de-leverage a Ponzi Scheme without it coming crashing down ?????
Yes. That is an interesting problem. I agree with the thesis of this article; I would say when we have another banking-credit crisis, not if; but it will be interesting because the FED has basically used up most of its ammunition; including credibility. Speaking of credibility, can you imagine what any educated person thinks of Obama's Presidency? He anounced that he was leaving a stable self-sufficient Iraq as our legacy and look at what we got. Mind you; it's not exactly front and center on your TV Screens; Propaganda Incorporated isn't featuring this as this months lead item; but it is this months' lead item; and it's absolutely devastating to American Credibility; I mean we have no credibility left in Europe; or anywhere else. None. We're the fools of the world.
Imfuckingpossible.
All the charts are Shadow Puppets to give the illusion there is continuity during the take down of America's middle class; The Great Extraction. You might call this an Extraction distraction. Do you trust Fred charts?
What instruments are they talking about?
I mean, we know about the debt, right? Although we keep trying to forget about it.
Say what?
This concludes this comment.
Unsustainable.
We have reached the end of the Internet.....
Applies to the whole of our current, global industrial form of civilisation as everything peaks after 300 years since it all kicked off in England.
On a long enough time line Malthus was right, or Marx for that matter, minus his utopian belief in a bright future.
Everything is sustainable - until it isn't that is.
Define "is"....
but at least the economy is much, much stronger!
The 'system' wants you to keep buying
The 'system' wants you to assume more debt
The 'system' wants you to ignore the inflation 'noise'
The 'system' wants you to shut the fuck up and take your meds
The 'system' wants you to have a Coke and a smile, and then you can STFU