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This Is How America Has Changed Since The Last Fed Rate Hike
On June 29, 2006, the Fed did something it would not do again for (at least) nine and a half years: it hiked rates by 25 basis points, its 17th consecutive rate hike. Everyone knows what happened after.
On December 16, 2015, the Fed is expected to do something it hasn't done for 3,457 days: hike rates by 25 bps, ending the longest period in US history (84 months) of zero interest rates.
How has the world changed in the interim? Some quick observations from BofA:
- Back then US housing starts were booming (2¼ million per annum), a stock market bubble was taking place in Saudi Arabia, another one was forming in China, no one had heard of “Quantitative Easing” and there was no such thing as the iPhone.
- Today, US housing starts are moribund (around 1 million per annum), the Saudi’s have just been downgraded (a devaluation of the Saudi riyal is one of BofAML’s noted “black swan” events in 2016), Chinese debt deflation has reduced China’s “growth” opportunity set to babies, tourists & capital outflows, central banks have purchased a remarkable $12,400,000,000,000 of financial assets since Bear Stearns, and the iPhone now powers retail sales.
And here is the biggest difference: back then total debt/GDP was 61%, with total debt just over $8 trillion. Now, it is 104%, with the total US debt just shy of $19 trillion.
Good luck Fed.
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NIRP will clearly put this back on track.
Remember: "War Is the Health of the State":
http://www.wendymcelroy.com/articles/warfreem.html
Plan accordingly.
that's not total debt
Is that red bar Janet Yellen's used tampon?
11th-hour entry for worst comment of the year. Festooned with a selfie up-vote to boot.
Agreed. The article needs to emphasize that it's talking about Federal Govt debt. Total debt (public and private) in the US is closer to something like $60T, if I remember correctly.
They "Leaders, Deep State" know the game is up.
We are all fucked!
That is all.....
yikes
so what's that statistic? No country has ever avoided a currency collapse when their debt to GDP has exceeded 100%? Awesome. Our future's so bright, we gotta wear gold and flack jackets.
We don't win at debt to gdp anymore. I will make debt to gdp more huge. It will be so huge it will be wonderful.
Rate hike means more debt to service at a higher US dollar, while money multiplier goes down resulting in less lending and less GDP. Which results in even higher debt to GDP.
$20T in '16- FORWARD
So it took $10.5T in new debt to generate $4.3T in new GDP.
What's the Keynesian multiplier for that?
The GDP is an annual calculation vs the debt, which stacks upon itself infinitely. Would have to add up the GDP from every year until now, and stack that against the debt levered.
Well clearly, as Paul "dickhead" Krugamn said..."We have not done enough"
The US came out of WWII as the dominant military and economic power in the world. The US economy reached its nadir in the mid 1970’s, and since then has been in decline, a direct result of increasing competition from a re-industrialized Japan, EU and China. In an attempt to overcome these structural economic problems, Government/ corporations have promoted neoliberal policies which have- 1) cut taxes for the wealthy, 2) attacked organized labor (firing of PATCO workers), 3) outsourced good paying manufacturing jobs to Mexico, China and other low-wage platforms (beginning with NAFTA), 4) deregulated finance- repeal of Glass Steagall act and passage of Commodity Futures modernization act of 2000 (setting the stage for the 2008 financial implosion) and 5) introduced more tax cuts for the wealthy in 2000 (Bush II). Following 911, US foreign policy has become increasingly bellicose and reckless- the US/NATO war theater now extends from the Levant, to Caspian Basin, Persian Gulf, China Sea, Indian Ocean, Horn of Africa, the Maghreb to Eastern Europe and Russian Border. Not only is this policy extremely dangerous, it is astronomically expensive for US taxpayers. After the 2008 financial meltdown, the FED began its QE program, effectively transferring $ trillions from taxpayers to prop up (still) insolvent banks; this money has inflated assets - stock market and trendy real estate and propped up auto sales with subprime auto loans and other financial gimmicks. The end result- these policies have enriched a small group of financial speculators at the expense of the vast majority of working people. They have destroyed jobs, purchasing power and the accompanying tax base. The only way the US government can continue spending $ trillions on war, Wall St. bank bailouts, SS and Medicare is to increase debt.
This is one of the most succinct and accurate descriptions of the decline and fall of the American empire I have ever read. Great job. I may just steal it and put it on my FB page. Its a 3 minute American history lesson.
hence why it's time for governement debts to blow up ..
a forest needs a good wild fire every 80-100 years .. and so do sovereign debts.
You mean the "Black Man" Bernie Madoff'd us....Say it ain't so....I was told the "magic nergo" would never lie and could never be a racist...