Total US Debt Is Back To Its Great Depression Peak

Tyler Durden's picture

Long before McKinsey released its 2015 report which showed that, contrary to repeated, erroneous analysis and propaganda media reports, not only has the world not deleveraged at all but has added some $60 trillion in debt since the crisis (a number which mostly thanks to China is about $5 trillion higher over the past year) we warned that the primary reason why the world is unable to grow is because of an unprecedented mountain of debt that keeps growing. In fact, since the growth - and monetization - of debt by central banks is the critical precondition to keeping asset prices artificially inflated, it was also the case that global debt would keep rising indefinitely, at least until such time as the world finally hits its credit limit, a critical topic discussed extensively by Citigroup's Matt King in October of 2015.

Which leads to the question: based on historical analysis just where is the debt capacity for the world's biggest creditor, the United States, and what happens when said capacity is hit.

The following chart from Citi shows the last century of US non-financial leverage in context. As of this moment, consolidated US non-fin debt/GDP is about 275%, or roughly where it was US when the great depression stuck.

For those curious about the "tipping point" threshold levels, keep an eye on 300% - that's when the system collapsed last time leading to a devastated economy.

The second question: what happened next to unleash the greatest deleveraging in the history of the US? Why World War II of course.

Finally, on the role of debt, here is the simplest explanation we have read since opening a finance 101 textbook.

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KnuckleDragger-X's picture

We've got computers to help us now. So I expect they'll make it much worse this time. I'm long on beans, cornbread, and large caliber ammunition......

GUS100CORRINA's picture

To All:

All I can say is WOW to this chart. I think Speaker Paul Ryan should use this chart the next time he talks with President Obama. His comment should be: "Well done Mr. President. You are going to go down as one of the worst leaders in American History. It looks like you are going to take the rest of us down the toilet with you."

Having said the above, it looks like all the pieces are now in place for the "Seventh Mark" to be fulfilled. Below is how it has unfolded for America for the last 50+ years. GOD is patient and long suffering, but his patience and warnings are not infinite.

When I look at this chart, I have to agree with the data. Not even the corrupt CBs can stop the final outcome. What is stunning is when one realizes that we are actually no futher ahead after all this BS and have actually dug a pretty deep financial pit for future generations. Case in point, FED balanace sheet is now 4+ Trillion bigger, America's Debt is now 10+ Trillion larger, Student loans are about 2 Trillion higher, 80% of the S&P500 has corporate balance sheets that are in the worse shape in history due to debt-leveraged stock buy backs, healthcare costs are soaring and our foreign policy is an utter disaster. And guess what ... the S&P is no higher than it was in 2008!!!!! 

In Solomon's prayer, 2Chr6:12-42, he lays a petition before GOD to have mercy on Israel when they commit sins that will result in judgments from GOD. Below are the seven Marks of God's judgment outlined in Solomon's prayer found in 2Chr6:12-42:

1. The First Mark: Removal of God's Blessing (How is that working out for everyone? Are you better or worse of today when compared to 20 years ago?)

2. The Second Mark: Injustice (Are people being jailed by corrupt government policies and laws? YES ... JUST LOOK AROUND.)

3. The Third Mark: Military Defeat (IRAQ, AFGHANISTAN, VIETNAM, etc..)

4. The Fourth Mark: Drought  (Remember California and Texas to name just two? How about much of the western United States?)

5. The Fifth Mark: Hardship, Death, Attacks on Our Cities (Remember 911 and Other terrorist events in America Recently. Regarding hardship, how about Detroit, MI or Flint, MI? Does 2015 San Bernardino attack, CA ring a bell?)

6: The Sixth Mark: Abuse of Immigrants (I would say we are there today, wouldn't you? What a mess!)

7. The Seventh Mark: War and National Collapse (How is the war on terror going? How about American deficits and debt? Does anyone think the 250 Trillion dollars in derivatives carried by 5 largest US banks is a good idea? Can anything go wrong with our "Too Big To Fail" G-SIFIs?)

Based on the above, we are at "DEFCON 1". Or to use a football analogy: "It is fourth down with four seconds left on the clock and we are on our own 4 yard line behind by 6 points." Can America score a touchdown or will it lose the game? We have hope, but the odds are heavily against the us. The chart above only confirms the fact that financial collapse looks ready to happen. All that is needed is a spark to set it off. We have stolen from the next generations to keep things proped up based on 'FAILED' Keynesian economic theories! WE ARE AT THE SEVENTH MARK!!

May GOD have mercy on America!!!

 

 

 

 

daveO's picture

It looks like the final, parabolic spike came in the early '30's, after incomes fell. So, it appears it's gonna get a lot worse.

Heavy's picture

All to help a few bankers...

Captain Chlamydia's picture

Jeeeeesus nigga! You still in this God shit? Serious? 

Theonewhoknows's picture
Theonewhoknows (not verified) May 14, 2016 12:22 PM

To answer how long can this soft collapse go on you have to look at Japan - they are going full swing with the same policies of printing and inflation for what, 3 decades is it?

 

I think they are the perfect example of how to eat a cookie and have a cookie (while the world is consumed in flames). Check the recent implementation of this theory in Europe - one name 'Hypo Alpe Adria' and 7 years delay http://independenttrader.org/another-bank-files-for-bankruptcy.html Now imagine the same with more banks and bigger - yup, we still getting screwed.

Just bring in this global reset already so we can start rebuilding the economy 

FreeShitter's picture

The tribe loves to bleed you slowly. Venezuela is our future if we are lucky. Get the shit over quickly.

CorporateCongress's picture

Well without the 30y credit/growth explosion in China, Japan probably wouldn't have kept the system from crashing

CorporateCongress's picture

Who is going to "save" the world this time?

ejmoosa's picture

Japan has a slightly different demographic picture than the US.  We are increasing our population and the demands from government for food stamps, education, and other expenses that come out of taxpayers current and future earnings.

 

Japan?  Since 1980 they have added a net of 10 million people. And their head count is declining

The US? Nearly 100 million since 1980. And climbing...

 

You can bleed a lot longer when you have fewer leeches on your corpus..

FredFlintstone's picture

Slightly different? Ha. We are worlds apart on demographics.

solidus's picture

Something wicked this way comes.

Darth Rayne's picture

https://m.youtube.com/watch?v=3HdmA3vPbSU

A cartoon. Debt must grow or the financial system collapses.

Xscream's picture

All debt does is pull demand forward. It creates nothing but future problems at high levels. Debt must be paid someday  by someone. The central banks seem to think inflation is the answer to the problem. That also just covers up the problem and opens a whole new pandoras box of problems. The next two generations (at least) are getting stuck with a huge bill. I hope they find a way to bill those who ran up such a ridiculous number. We should feel shame with what we have done to the children of tomorrow. 

Alpha Shark's picture

We could also default on a portion of debt. Bondholders should have to take a haircut or that defeats the purpose of a risk / reward ratio and is more evidence of the entitlement culture that has grown up around us.

Trump alluded to default and then backed off. If he gets elected I hope he does not renege on his early campaign promises.

withglee's picture

We could also default on a portion of debt. Bondholders should have to take a haircut or that defeats the purpose of a risk / reward ratio and is more evidence of the entitlement culture that has grown up around us.

Is your comment not founded in the assumption that capitalists and/or governments create money?

Mr. Bones's picture

Trump didn't allude to default.  Look in to his clarifying remarks.

Alpha Shark's picture

He caught himself during the interview. It was so obvious. Here is the Bloomberg article link

http://www.bloomberg.com/news/articles/2016-05-06/trump-s-comments-on-u-...

withglee's picture

Debt must be paid someday  by someone.

And if it is not, it is DEFAULT. Ever see a time series of DEFAULTs. No? Hmmm. I wonder why not.

tricorn teacup's picture

Default can still be seen as the debt being paid, by the lender instead of the borrower.  Similarly, inflation pays debt at the expense of savers who may have had nothing to do with the loan.

withglee's picture

TT: Default can still be seen as the debt being paid, by the lender instead of the borrower.

WG: Default is failure of a trader to return money he created as promised. The idea of "lender" and "borrower" is a contrivance of capitalists when they co-opted the trader invented MOE process.

That not withstanding. Show me a time series of defaults (regardless of how you were taught to view them). And while you're at it show me a time series of interest collections to show they are in perpetual perfect balance with the defaults ... a necessary attribute of any proper MOE process.

TT: Similarly, inflation pays debt at the expense of savers who may have had nothing to do with the loan.

WG: Wrong. Savers have nothing to do with it. The relation is INFLATION = DEFAULT - INTEREST. For a proper MOE process it is perpetually zero. When it is not zero, the orphaned money which is DEFAULT causes a money supply/demand imbalance which dilutes the value of competing in-process trades. Savings, held in the form of money, are just in-process trades ... whose value gets diluted if the process is flawed ... actually purposefully corrupted as our Fed controlled process is with its goal of a 2% leak and delivery of a 4% leak ... when a 0% leak is the only proper value.

But you've learned your lessons well. Now go find a real teacher ... who isn't a parasitic capitalist who is about teaching you how to serve "his" interests to the detriment of traders' interests.

CrabbyR's picture

We have done? Bankers and governments have fleeced us ..I this stuff was taught in schools it could never happen...the few have raped the many and because they are greedy hoodwinked future generations too

Skiprrrdog's picture

I had nothing to do with it. In 62 years, I have never voted, not once; even if I had, it would have made no difference. Blaming the problems of today on a specific generation is a waste of time and an exercise in fuitlity. I ALWAYS pay my own debts...the debts that .gov has racked up, in the name of whatever, that is their deal, their cross to bear, not mine. I did not ask to be born into this hellhole of a world and had I been given a choice, would have politely declined. For the past eight years, we have had a homosexual muslim president in the Whore House...can it possibly get any worse? Only if it goes on for much longer. I hope and pray it gets brought down soon, and takes all of homo sapiens with it. Then the planet can heal, and all of the wonderful, peaceful organisms on the planet, everything except for us, basically, can thrive in peace...

blindfaith's picture

 

 

Get a life...you have the award for the most pathic of the day award.  If you do not try to make a difference, then shut up, you have no VOICE.

morongobill's picture

Bullshit. The elites don't care whether you vote or not; in fact, they probably think the voters are the pathetic ones.

Their's is the only VOICE that counts.

acetinker's picture

Who's this we you speak of, Kemosabe?

We were intentionally misled by a small cadre of financiers and their bought-and-paid-for politicians.  Religion played a major part as well, but we need not sort that part out, right now.

You can and will, affect the necessary changes, whether you know it or not.

You will default on all your debts.  This is unaviodable.  When you do, the great notional wealth of your owners and their apparatchiks will evaporate into the ether.

Behold the Great Colossus.  I ask not that you raise your hand against him, but merely that you resolve to support him no longer.  If you do this, you will witness him crushed by his own weight and fall into pieces.

That was LaBoetie paraphrased from memory- but is he not correct?

It doesn't matter, after all.  It's happening regardless.

To Hell In A Handbasket's picture

Why worry about debt? Let them print as much QE money to further enrich the top 1%. Why should plebs like me worry about currency debasement? Our elite know what they are doing. They always have. Have faith in these kleptocrats. #Banksters lives matter#

no ita lever's picture

Key word in all of this...propaganda. Learn to discern. It is your only hope.

Everything, with a grain of salt my friends, I don't care where you read it or see it, it has the potential.

Critical thinking has been taken out of the classroom, and replaced with mindless robots, who bury there noses in their little iThumbs, pathetic. They have no valid arguments, and spew the party lines and soundbites, so they can feel validated, in their little safe places.

Debt, you say, all $200 TRILLION of it? DEBT is $19T statutory +  $62T private + $107T unfunded liabilites = total DEBT of America alone. How is it going to be paid off? Never, not in a million years, and growing by $1 TRILLION per year. Doubt me on those numbers? Go to usdebtclock.org - most here on ZH know about this site.

I scoff at the ignorant fools who think we can even pay the $19 TRILLION off. They could put a dent in it with bail-ins though, so watch out.

Default is coming, a capitulation, a LOSS OF CONFIDENCE! That is your black swan.

YBIC

Consuelo's picture

 

 

The 'Black Swan' is not an event that takes place within the confines of U.S. markets proper.   It is a (series) of geopolitical events - many of which are already in motion right now - inching their way towards completion, which render the importance of $USD as the global trade vehicle, a moot point.

no ita lever's picture

I agree to a degree, you notice I did not say where the default originates, A black Swan is an orchestrated event to take the blame for the real cause of the event, an obfuscation of events. Watch the other hand.

It can happen anywhere, America is not that special.

 

YBIC

True Blue's picture

A couple points occurred to me in my reading of this.

Obviously nothing was deleveraged, the entire illusion of 'recovery' is based on fiat pumping and we all know it.

Next, if China has added 5 trillion to their debt balance for this past year: who is buying it, and given the supply glut driving down China's 'economy' -why? And is that debt in yaun or ren? Remember, China has 2 currencies; one for domestic use and one for trade with the round-eyes.

Why had/has China been stockpiling essential war commodities like oil, copper, iron, aluminum etc. so far in excess of its current demand; even if they are building 'ghost cities' (which look an awful lot like potential evacuation centers for entire metropolitan areas actually, and as 'ghost cities' are not on anyone's priority target list.)

Why did China end its one child per couple policy?

What would happen if instead of trickling down their exposure to American debt (as China has been assiduously doing the past couple years, $180 billion in August alone) they decided to flood the world market with the remaining 1.24 trillion dollars they hold?

The Federal Reserve's 100 year run as the world's reserve currency manipulator is historically due to end, just as the Bank of England's run did before it (entropy and diminishing returns would seem to limit the looting spree to little more than a century, give or take a good war or two.)

I'd bet that the person or persons who bought China's recent debt issuance are the same group who bought up the Bank of England in 1815, and established the Federal Reserve in 1913; parasites prepping the next host. War clouds are on the horizon everywhere you turn; like someone is deliberately stirring up as many hornets' nests as possible in the hope of one big juicy War (bold and caps, because they have learned a lot since WWII, particularly in Africa -this time it will involve basically every single man, woman, and child on the planet) in order to suckle the last drops of blood from the American victims before moving on to a happy ending as the masters of the PBOC in 'reserve currency' status.

Long on pine boxes and quicklime.

 

Paul Kersey's picture

It's the household debt that worries me.  Before and during the Great Depression, other than farmers (who were leveraged to the hilt), households weren't carrying a lot of debt.  One couldn't buy a house without putting at least 50% down.  And, since there were no mortgages over five years in duration, most people who owned homes, owned them outright.  Today, households are carrying mortgage debts of over $13.8 trillion.  Throw in over a trilion in student loan debt and another near trillion or so in credit card debt, and the debt load during the Great Depression, when there was no student loan or credit card debt, begins to look like solvency compared to the debt households are carrying today.

wmbz's picture

Death by a thousand paper cuts, moving closer and closer to a main artery.

south40_dreams's picture

Central bankers are delaying the inevitable by printing vast sums of paper money out of thin air.  When she blows, she blows big

FreeShitter's picture

and she blows by design so the owners get to usher in a worse ponzi scheme. History proves this until the sheeple wake the fuck up and take out their oppressors.

silver surfer's picture

From Citybank... ahha thats why its all non financial debt..haha better not include financial sector debt, and all those pesky derivatives. 

Redheart's picture

We are being destroyed by the debt purposely, both Republicans and Democrats are responsible.  The Senate just passed an appropriation bill that gave Obama more than he requested.....yet again.  The Ominbus from December '15 did the same, gave him more than he requested.  Paul RINO and his band of RINOs are perfectly fine with this. Printing more money won't help....I expect a Venezula type scenario will play out when the end comes.  http://dailysignal.com/2016/05/12/first-senate-appropriations-bill-passe...

oncemore's picture

Kenyan - Indonesian mulatto will handle it.
he article is only a peddling fiction.

saldulilem's picture

Hypothetically, what would happen if treasury stops issuing new bonds? Domestically this means the Fed balance sheet / money supply M0 stops expanding and starts contracting with maturing redemptions. However internationally foreign investors would shift allocations to euro, yen, rmb bonds. So, would USD go up or down?

saldulilem's picture

Hypothetically, what would happen if treasury stops issuing new bonds? Domestically this means the Fed balance sheet / money supply M0 stops expanding and starts contracting with maturing redemptions. However internationally foreign investors would shift allocations to euro, yen, rmb bonds. So, would USD go up or down?

True Blue's picture

If you reduce the supply, and demand remains constant, price goes up.

Which of course, they constantly tell us is a vewwy vewwy bad thing.

dizzyfingers's picture

Imperial Congresses having voted themselves riches time after time. And can't leave out f.s. voters who forced congresses to do the same for them.

http://www.dailymail.co.uk/news/article-3586858/Screw-generation-Anonymous-congressman-writes-tell-slams-nation-naive-self-absorbed-sheep-admits-never-reads-bills-votes-on.html "Screw the next generation..."; Democrat congressman.

Quote: "What does it matter (to me)?!"

KingTut's picture

This chart isn't even close, reality is much worse.

Check out 

https://econ411w14.lsa.umich.edu/tag/ray-dalio/

financialrealist's picture

Comparison of then vs now is irrelevant in every way.

tricorn teacup's picture

And what major difference, pray tell, makes the comparison irrelevant?

Wannabee's picture

I am Paul Krugman and I do not approve this message.

dizzyfingers's picture

https://www.youtube.com/watch?v=6O8vM0-6EEE Gadaffi's country was rich without bank loans

jg's picture

The downward movement in GDP for the Great Depression began in '29 and reached its bottom in '33 (which corresponds with the peak in the Citi graph).  So, we are beyond the tipping point, and are tipping as we speak.

John C Durham's picture

Yes, yes. Uh-huh. Now is just like "last time".

So, our recovery came how? Was it that the banks charged ahead and took care of our national problems? Hmn?

The fact is there was a judgement of Congress and the President that the problem was WITH THE BANKS. Thus, the banks came under strict limits (Glass/Steagall) that required them to give up speculation in all its forms and focus on...on...yes, on BANKING.

ALL problems related to the United States ever, come back to banking...bankers.

Not Government, you fools. It is the lack of Government.

In '99 Clinton killed Glass/Steagall. The last, and most serious, act of many Congressional/Executive criminal events which amounted to a giving away of the whole nation to the banks. The end.

The rest is only one long last sad song telling us in many ways that criminal BANKS, living in a governmental legal VACUUM, are behind all of the chaos we see everywhere.