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Guest Post: The One Chart That Says It All

Tyler Durden's picture


Submitted by Charles Hugh Smith of OfTwoMinds,


Depending on debt to fuel nominal growth leads to an economic death spiral.


Sometimes one chart says it all. Here is a chart of the S&P 500 (a broadly based measure of the U.S. stock market) in a ratio with total consumer credit, courtesy of frequent contributor Chartist Friend from Pittsburgh.

Charted against consumer credit, the S&P 500 (SPX) collapsed after the 2000 dot-com bubble burst and has been tracing out a descending channel since then.

Chartist Friend explains:


A funny thing happens when you price the stock market in something other than itself, say gold or the PPI or in this case Total Consumer Credit outstanding. You wind up with a depiction of the market that is sometimes very different from the headline-nominal performance number. The following chart shows that in the 80's and 90's we had a real bull market, one based on production and innovation that was able to outperform the growth of credit in the economy. Excessive borrowing wasn't needed during that time. Now we're borrowing like a drunken shopper, and all we can come up with are centrally planned consumer-oriented bubbles.

What we see very clearly in this chart is the dramatic spikes created by credit bubbles--the housing bubble in 2001-2007--and massive Central Planning intervention:
The Federal Reserve's expansion of money supply and constant injections of liquidity into markets and the Federal government's $6 trillion bailout/stimulus debt binge since 2008.

The critical feature of each credit bubble is that the SPX responds with less vigor to each dose of credit. This is the classic downtrend--lower highs, lower lows.

This is the chart of a death spiral. Here is one way to understand the dynamics revealed in this chart: when depreciation of productive assets (factory tools, software, refineries, etc.) outstrips new investment in productive assets, then output, income and profit decline. (Note that building McMansions in the middle of fields and pumping hundreds of billions of dollars into overseas adventures are not productive investments, they are mal-investments.)

Once the cost of servicing all that new debt outstrips increases in income, then there is less money available for productive investment. Debt service and mal-investment thus set up a positive feedback loop, a.k.a. a death spiral.

The housing bubble created over $5 trillion in new debt to service while it produced effectively zero new productive investment (housing is ultimately a form of consumption).

The Fed's injections of liquidity via trillion-dollar purchases of toxic mortgages and Treasury bonds does not funnel money into productive investments--all it accomplished was to further incentivize speculative churning and financialization to enriched the few at the expense of the many.

So sit back, tighten your seatbelts and enjoy the death spiral ride, brought to you by the Federal Reserve and your elected servants of the financial Elite. Now that the latest credit bubble is popping, the market will roll over and continue tracing out the down-channel until it hits zero: the next credit bubble won't spark a rally at all, it will simply spark implosion.

For more on the dynamics of financial fraud and credit bubbles, please check out:

Money from Nothing: A Primer on Fake Wealth Creation and its Implications (Part 1)

(March 12, 2012)

Money from Nothing: A Primer on Fake Wealth Creation and its Implications (Part 2)

(March 14, 2012)

Our "Let's Pretend" Economy: Let's Pretend "Job Growth Is Best Since 2006"

(March 9, 2012)

Our "Let's Pretend" Economy: Let's Pretend Financialization Hasn't Killed the Economy

(March 8, 2012)

Our "Let's Pretend" Economy: Let's Pretend Student Loans Are About Education

(March 7, 2012)


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Thu, 03/22/2012 - 10:57 | 2280392 Fastback
Fastback's picture

maintaining the Status Quo, A big ugly nasty mess

Thu, 03/22/2012 - 11:00 | 2280400 VulpisVulpis
VulpisVulpis's picture

Time for this Again:

"The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain.

The corporations which create the paper money can not be relied upon to keep the circulating medium uniform in amount. In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community. 

The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people. We have already seen its effects in the wild spirit of speculation in the public lands and various kinds of stock which within the last year or two seized upon such a multitude of our citizens and threatened to pervade all classes of society and to withdraw their attention from the sober pursuits of honest industry. 

It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government."

Andrew Jackson, Farewell Address, 1837  

Thu, 03/22/2012 - 11:06 | 2280420 Fukushima Sam
Fukushima Sam's picture

This Andrew Jackson guy sounds like a terrorist.

Thu, 03/22/2012 - 11:13 | 2280447 battle axe
battle axe's picture

Death Spiral. And now for some more happy news, "War with Iran probably in Q2 or early Q3."

Thu, 03/22/2012 - 11:19 | 2280468 Roger O. Thornhill
Roger O. Thornhill's picture

Jackson's speech could have been written today - the great myth is that we are evolving as a society, whereas I think we are devolving. The intelligence of the founders, like Jefferson, etc. are quite impressive.

That they attempted to address the people as equals was also impressive.

Today there is a celebration of stupidity - and I don't blame the people. Anyone exposed to the mainstream media or public schooling will lose what natural IQ points they were born with. Even with college I think it took a few years to shake off the moronic philosophies of my college professors. And now, with age, I see those "professors" for the barely credible fools they are. Pontificators in the echo chamber that is higher education.

Thu, 03/22/2012 - 11:53 | 2280525 The Big Ching-aso
The Big Ching-aso's picture



Obviously a failure to communicate.  Smith needs to take an upcoming Fed-Ed class to get his 2 minds right.



Thu, 03/22/2012 - 12:03 | 2280603 Badabing
Badabing's picture

Appl  iphone, ipod, ipad, irobot?

irobot  was on the other night, a story about a detective in the year 2035 named Spooner played by Will Smith who has a lack of trust for the robot population. The story was originally written in 1950 by Isaac Asimov and the movie screen play was written by Jeff Vintar and Akiva Goldsman. In the movie detective Spooner is sitting at a bar, when the police captain walks in and Spooner orders him a beer. After a short dialog Spooner pays for the beers, two for him and one for the captain. The bill for the three beers is $46.50. today in a small pub in NYC it’s about $5.00 a beer so the bill today would be around $15 for the three beers. We are lead to believe that it will be normal to see over 200% inflation in 23 years. Subliminally planting the expectation and acceptance of ripping us off.WHAT THE FUCK GIVES THEM THE RIGHT TO INFLATE THE MONEY WE WORKED FOR AND SAVE!                 


Thu, 03/22/2012 - 12:10 | 2280620 withnmeans
withnmeans's picture

Everybody should tune in to Bloomberg, Michael Pinto is right on. Taking the wood to ole Pimm Foxx..... Love it

Thu, 03/22/2012 - 14:01 | 2280762 TruthInSunshine
TruthInSunshine's picture



"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."


-- Andrew Jackson

(1767-1845) 7th US President *In 1836, Jackson forced the closing of the Second Bank [Fractional Reserve Charlatan Printshop] of the U.S. by revoking its charter.

Thu, 03/22/2012 - 11:44 | 2280545 john39
john39's picture

could have, if most elected officials were not functionally illiterate banker puppets elected by a drugged up and dumbed down electorate which can't differentiate between TV and reality...

Thu, 03/22/2012 - 11:47 | 2280551 Clay Hill
Clay Hill's picture

If you think ol' Hickory's farewell address was still relevant, wait until you see his veto message concerning the charter extension for the Bank of the United States.

It is a bit long, but covers everything from Government dependance on debt money creation by private parties, to conflicting powers of taxation between Federal and State Governments, to the dangers of being beholden to foriegn investors during a time of war.

Thu, 03/22/2012 - 12:19 | 2280644 DoChenRollingBearing
DoChenRollingBearing's picture

@ battle axe

+ 1

¨Death Spiral¨, Whhhhheeeeeeee!

Gold, bitchez!

Thu, 03/22/2012 - 12:22 | 2280651 SheepDog-One
SheepDog-One's picture

I'll believe 'war with Iran' when I see it, not sooner. Now Russia has installed special forces troops in Syria, so any action we take we'll be going against Russian military not guy in old bedsheets. I say its a stalemate.

Thu, 03/22/2012 - 12:39 | 2280696 V in PA
V in PA's picture

What makes you think Russia and the USA have a different agenda in Syria? The media!?! Last time I checked, the US is becoming more like them (USSR/Russia) than most would care to admit.

Thu, 03/22/2012 - 13:49 | 2281025 viahj
viahj's picture

Russia is sending troops into Syria just like they did before we invaded Iraq, to secure their military bases and weapon systems that they sold to Assad (that shit is resalable to the new regime or someone else so no sense in letting it get destroyed needlessly).

Thu, 03/22/2012 - 11:26 | 2280495 cossack55
cossack55's picture

Ask some Native Amerikans.

Thu, 03/22/2012 - 13:59 | 2281082 LowProfile
LowProfile's picture

What the FUCK does that have to do with what he did about the banks!?

Congratulations, you're on the list.

Thu, 03/22/2012 - 11:32 | 2280513 downrodeo
downrodeo's picture

ol hickory, that dude is a personal hero of mine

 sure he wasn't perfect but

we can't say he didn't warn us

Thu, 03/22/2012 - 11:55 | 2280574 JPM Hater001
JPM Hater001's picture

Get the pipe... We're heading for 13000 as we speak

Thu, 03/22/2012 - 12:17 | 2280636 11b40
11b40's picture

Just like clockwork:

12:03 PM Bullish sentiment rises to the highest level in 4 years, according to the Charles Schwab Active Trader Survey, with 51% of frequent traders in the bull camp vs. just 25% last October. Most bullish sectors: Tech and energy. Least: Financials, healthcare, minerals, consumer discretionary.

Everybody's happy.  Must be time to put it in reverse.

Thu, 03/22/2012 - 12:07 | 2280613 andyupnorth
andyupnorth's picture

Yup, a personal hero of mine too!

Gotta love Antal Fekete too...


Thu, 03/22/2012 - 12:08 | 2280616 vast-dom
vast-dom's picture

1837 they knew the game and were warning a la military industrial complex... If Jackson today was privy to just The Feds toxic shadow books of derivatives to the Nth and caustic bank garbage debt he would organize a revolt!

Thu, 03/22/2012 - 11:44 | 2280541 tempo
tempo's picture

There is no alternative to trillion dollar deficits in the West with the worldwide labor glut forcing "good wages" in the East to $1.25/hour, working at Foxconn (AAPL)12 hours/day, 6 days/wk, living 20 per dorm room, facing dangerous working conditions w/o legal/environmental protection. Our only growth business is subprime trillion dollar lending to unqualified students w/o assets so they can have a "college experience" knowing there are no jobs for 85% of the graduates who have now become slaves to the banks. IMO the warm weather accounts for most of the growth in jobs, housing and retail sales which pulled demand forward and goosed SPX. AAPL...represents the worse type of Corporate greed hiding in the 60's love logo. You users and employees should be ashamed.

Thu, 03/22/2012 - 12:48 | 2280728 blunderdog
blunderdog's picture

    AAPL...represents the worse type of Corporate greed hiding in the 60's love logo. You users and employees should be ashamed.

It's not just "AAPL," though.  If you really believe that the consumer is responsible for the crimes of the producer, then it should be properly broadened: If you use a piece of electronics, you should be ashamed.

Buy a pad of paper and move to a cottage in the woods.

Thu, 03/22/2012 - 12:59 | 2280804 Vince Clortho
Vince Clortho's picture

in a fiat monetary system, everyone is a debt slave outside of the CBs.

Thu, 03/22/2012 - 13:23 | 2280899 ClevelandJanelle6
ClevelandJanelle6's picture

my neighbor's aunt makes $67 hourly on the laptop. She has been fired from work for ten months but last month her check was $20142 just working on the laptop for a few hours. Here's the site to read more ....

Thu, 03/22/2012 - 13:51 | 2281046 viahj
viahj's picture

you guys keep forgetting your decimal points....



Thu, 03/22/2012 - 15:45 | 2281522 Ruffcut
Ruffcut's picture

his neighbors aunt has very nice tits and shows them for cash. My tits don't look so good.

Thu, 03/22/2012 - 10:57 | 2280393 -1Delta
-1Delta's picture




ipads are all bot with cash not credit! Things are fine- this is a bull market! or a central bank's artifical prop up...

Thu, 03/22/2012 - 11:07 | 2280425 wandstrasse
wandstrasse's picture

EVERYTHING is 'bot' with debt... all cash is born as debt issued by the mega elite out of thin air... their wet dream came true...

Thu, 03/22/2012 - 12:17 | 2280634 Eternalko
Eternalko's picture


Well, here is a screenshot from my bachelors paper. US total debt (households, business, financial sector, local/states, federal, external) change and DJI growth.

Even funnier :)



Thu, 03/22/2012 - 12:40 | 2280700 kridkrid
kridkrid's picture

Could you translate that? What does (fed) mean on your blue line?

Thu, 03/22/2012 - 12:47 | 2280722 Eternalko
Eternalko's picture

As I said, US total debt VS DJI.

FED is the data source. Z.1 Debt outstanding report.

Thu, 03/22/2012 - 10:58 | 2280394 wandstrasse
wandstrasse's picture

This means that the debt fiat monetary system is - gasp - NOT sustainable???

Thu, 03/22/2012 - 10:59 | 2280399 THECOMINGDEPRESSION

Space control: We have problems...

Thu, 03/22/2012 - 11:00 | 2280404 Jason T
Jason T's picture

perhaps better to see total stock market value Vs. total consumer debt.. 

Thu, 03/22/2012 - 11:06 | 2280422 SheepDog-One
SheepDog-One's picture

'Stock market value' is a real tricky thing, todays 'reflected value' on the ticker is fake, because no way it could be cashed out at that level, probably not even half these levels. Could every share, or even half the shares of Apple actually be sold for $600? Good luck with that, I dont believe it for a second, all just fake. 

Thu, 03/22/2012 - 11:17 | 2280463 CrimsonAvenger
CrimsonAvenger's picture

Yes - HUGE point. People forget the demographic element to this, namely that this 'bull market' period corresponds with the huge Boomer cohort existing at their peak earning power and pumping up the cost of investments. It's supply and demand. When they all go to sell their bought-up assets the values will drop significantly.

Thu, 03/22/2012 - 11:24 | 2280487 Dr. Engali
Dr. Engali's picture

Bingo we have a winner. You will never see anybody on CNBS talk about that.

Thu, 03/22/2012 - 12:06 | 2280610 rqb1
rqb1's picture

not to disagree with you, but cortez said that yeaterday on fast money midday, and was ganged up on right after by all the other traders, talking heads.  not a cnbc fan, but was suprised to hear some truth, even if they did try to discredit him after

Thu, 03/22/2012 - 12:16 | 2280632 kridkrid
kridkrid's picture

I recognize, as I write this, that words like this can make me sound crazy, but... truth is allowed to be spoken, as long as it is marginalized quickly.  I think this is by design, partly.  That way, when people with the truth talk in their circles, it doesn't sound unique enough to pay any attention to it.  You can be "lumped" in with whatever "fringe" person said something similar on program ______________. 

Thu, 03/22/2012 - 12:46 | 2280724 V in PA
V in PA's picture

F@-KING BINGO! +1000

Thu, 03/22/2012 - 14:02 | 2281102 LowProfile
LowProfile's picture

Gettng harder and harder to do that, what with this Internet thing.

Thu, 03/22/2012 - 11:48 | 2280556 tabasco71
tabasco71's picture

Yes, back to what they are actually worth.

I guess if you whack all the goodwill and retained earnings off the balance sheet and then discount the debtors and assets values then you arrive at what the company is actually worth.

Thu, 03/22/2012 - 11:20 | 2280471 tabasco71
tabasco71's picture

Hadn't considered that before... but very true, if every share of Apple started to sell, the erosion in share price would mean that the overall return stock would be say 20-30% of what the current market cap is.

According to the way I modelled it, the first 20% out the door would be the ones who grabbed 80% of the value too.

Thu, 03/22/2012 - 12:16 | 2280631 Willzyx
Willzyx's picture

Tyler has posted this a few times.  Game theory and AAPL hedge fund holders.  In this broken market, the algos can't be counted on to provide liquidity.  Flash crash bitches!

Thu, 03/22/2012 - 11:41 | 2280536 rosiescenario
rosiescenario's picture

My guess is that after 5% were sold, the trend following algos would grab on and you would see about an 80% drop as the algos and the actual sellers competed....kind of a flash crash on crack.



Thu, 03/22/2012 - 11:02 | 2280408 urbanelf
urbanelf's picture

Sure, but the mistake you are making is assuming that debt is bad.

Try SPX + Consumer Credit or maybe SPX ^ Consumer Credit

Thu, 03/22/2012 - 11:13 | 2280421 hedgeless_horseman
hedgeless_horseman's picture



...the mistake you are making is assuming that debt is bad.

Remember that, according to Congressman Pete Stark, "the more we owe the wealthier we are."


Thu, 03/22/2012 - 11:35 | 2280499 kridkrid
kridkrid's picture

My thoughts on that video have shifted a tiny bit over the years.  We have chosen an absurd system in which we facilitate our collective economic interactions (fiat money loaned into existence through our banking system with interest attached to the "money" upon its creation).  Within that context, there is a certain absurd logic to what the congressman says, unfortunately.

Thu, 03/22/2012 - 11:37 | 2280528 Vic Vinegar
Vic Vinegar's picture

Same here.  At first I was enraged by it but now it seems there's a perverse logic to it.  On a long enough timeline...

Thu, 03/22/2012 - 13:45 | 2281014 AustriAnnie
AustriAnnie's picture

"The more we owe, the more wealth we transfer from others to ourselves, and the wealthier we are (and they aren't)"

Thu, 03/22/2012 - 13:57 | 2281065 kridkrid
kridkrid's picture

And this works until the point when people are no longer willing to accept the FRNs, I think. Then it collapses - for everyone. So it's important, while people are willing to trade things of value for your FRNs to do what you can to convert.

Thu, 03/22/2012 - 11:02 | 2280410 5880
5880's picture

the chart is BS

1960-70 wasn't a real bull market?

Thu, 03/22/2012 - 11:06 | 2280423 Quintus
Quintus's picture

Not in the sense that the article posits, i.e. did the market grow faster than the debt it took on to enable that growth?  Unless the underlying data is incorrect, then, as the graph shows, the growth during that period cost more to produce than it was worth.

Thu, 03/22/2012 - 11:09 | 2280432 SheepDog-One
SheepDog-One's picture

I think guys like this just want to see a 'green' chart, then it would be correct.

Thu, 03/22/2012 - 12:57 | 2280790 5880
5880's picture

95-2000 was "real bull market"

got it, yer smrt

its just spx/cc. 60-80 market doubles with credit expansion. 2000-12 market flat with credit expansion. 80-2000 credit explodes but not as much as the market

again, I don't see any love in this chart

Thu, 03/22/2012 - 11:41 | 2280535 bank guy in Brussels
bank guy in Brussels's picture

Chart seems to say things went downhill after the Kennedy assassination ... US gov't half-bankrupting itself doing the Vietnam War and Johnson's 'Great Society' at the same time ...

Then you have an 80s - 90s boom after the Reagan administration lowered US taxes ...

And that's it. Otherwise it's fakery on borrowed dollars ... a game not to work very much longer.

Thu, 03/22/2012 - 12:26 | 2280661 DoChenRollingBearing
DoChenRollingBearing's picture

I´ll buy that, good interpretation of the chart.

Thu, 03/22/2012 - 11:04 | 2280413 Yardfarmer
Yardfarmer's picture

"enriched the few at the expense of the many". 'nuf said.

Thu, 03/22/2012 - 11:07 | 2280424 Frank N. Beans
Frank N. Beans's picture

I'll add this chart to the others in my shoe-box full of "one chart that says it all"s.


Thu, 03/22/2012 - 11:10 | 2280437 Jim in MN
Jim in MN's picture

Yes.  May be time to change the headline to 'Yet Another One Chart That Says It All'.

Thu, 03/22/2012 - 11:07 | 2280427 monopoly
monopoly's picture

We all know about the debt and what is really happening on our planet. It is clear to us here what the end game is. BUT, until the algos, HFT and sheeples finally get it, and until AAPL breaks, nothings gonna change. A little dip and then we bounce back, time and time again.

Thu, 03/22/2012 - 11:11 | 2280441 SheepDog-One
SheepDog-One's picture

I dont think it depends on the algos 'getting it' theyre just slaves too, theyll just pull the rug out one morning when its lose/lose for the banksters and change the rules again. Of course at that point we'll all be broke and in some kind of Orwellian civil war or whatever, so good luck everyone.

Thu, 03/22/2012 - 12:30 | 2280672 DoChenRollingBearing
DoChenRollingBearing's picture

+ muchissimo  

SheepDog nails this, spot on!  They´ll just change the rules when they fancy.

In the Oct 2008 crash a friend of mine was heavily short the market (S&P 500).  One night, they changed the rules, and he missed out on making $250,000!  They cheated him for being right...

Thu, 03/22/2012 - 11:14 | 2280453 Dr. Engali
Dr. Engali's picture

That's how they lull you to seep so you can't capitalize when they pull the rug out.

Thu, 03/22/2012 - 11:17 | 2280465 SheepDog-One
SheepDog-One's picture

Its hypnosis, thats all theyre doing.

Thu, 03/22/2012 - 11:28 | 2280503 cossack55
cossack55's picture


Thu, 03/22/2012 - 14:20 | 2281206 hidingfromhelis
hidingfromhelis's picture


Thu, 03/22/2012 - 11:32 | 2280517 kridkrid
kridkrid's picture

despite all my rage I am still just a rat in a cage.

Thu, 03/22/2012 - 12:01 | 2280596 YC2
YC2's picture

what a shame that i have but one green arrow to give for an sp reference

Thu, 03/22/2012 - 12:52 | 2280753 V in PA
V in PA's picture

The world is a vampire...

Thu, 03/22/2012 - 13:29 | 2280946 kridkrid
kridkrid's picture

A brilliant song with greater insight as I grow older. And the original post is clearly correct... the methodical movements between optimism and pessimism while hidden in plain sight is our collapse. Hypnosis. But it doesn't really matter if you can see it... It's our cage.

Thu, 03/22/2012 - 11:08 | 2280429 tabasco71
tabasco71's picture

This chart explains the way I 'feel' about the position we are currently in... hopeless

Until China pops and we get an opportunity to bring a bit of balance back in the global economy, I can't see how anything we do is anything other than sticking plaster that washes off in the swimming pool time after time.

UK budget finally recognises and harps on about supporting start-up's/SME's to grow wings, but they are 5 years late with this support and even now it's probably just headline grabbers with little substance.


Thu, 03/22/2012 - 12:10 | 2280618 Harbanger
Harbanger's picture

I read somewhere yesterday that there's a coup happening in beijing.  I can't confirm.

Thu, 03/22/2012 - 12:34 | 2280687 Harbanger
Harbanger's picture

Something brewing over there, here's an article from today.


Thu, 03/22/2012 - 11:14 | 2280433 NidStyles
NidStyles's picture

Yeah I will have to call BS on that chart. LBO's were the major driver of equity and credit in the 80's and into the 2000's. They are what fueled the housing bubble then through the HUD, FHA and Freddie and Fannie. That whole mess was Inflation central, which is why the Interest rate ended up so high in the 80's, but the second time around they just tried passing it off as actual economic growth. We know now that it was just more Inflation.


The whole idea that the 80's into 2000's were more productive than the previous generations while everyone was migrating to foreign shores and the Fed and Wall Street was encouraging malinvestment during the whole time creating two very large bubbles just points out how full of shit this chart is.

Thu, 03/22/2012 - 11:55 | 2280575 Clowns on Acid
Clowns on Acid's picture

Yo Nid - Easy there big fella...the real productivity gains in the 80s and 90s were largely due to the advanes made in technology. Email, cell phones, cheaper processing of everything from orders to manufacturing all led to real productivity gains.

The debt amassed thru the social engineering of the Fed and State gov'ts, as well as the zero to negative real inteerst rates thru the late 90s and early 2000s (Alan Greenspan and Ben Shalom Bernanke) led to the debt bubble.

Pull yourself toward yourself.

Thu, 03/22/2012 - 14:13 | 2281162 Hohum
Hohum's picture

C on A,

Not so sure about that.  How about the old, dependable graph of Total Credit Market Debt v. GDP growth?

Thu, 03/22/2012 - 11:09 | 2280436 Wakanda
Wakanda's picture

Great chart Charles, thanks.

Thu, 03/22/2012 - 11:14 | 2280449 TradingJoe
TradingJoe's picture

"Muppets", listen up, buy the window dressing (today-tomorrow) ramp and SELL it ALL next week (Thursday-Friday) and SHORT THE SHIT out of everything moving! :))) got it?!?!



Stolpy :))

Thu, 03/22/2012 - 11:15 | 2280451 resurger
resurger's picture

this chart is insane!

Thu, 03/22/2012 - 11:16 | 2280457 t_kAyk
t_kAyk's picture

say, whats that trench right before 2013?  surely a keystroke error, i feel fine. 



Thu, 03/22/2012 - 11:18 | 2280464 rosiescenario
rosiescenario's picture

Needed: a new rubber cat...this pussy is losing its bounce.


A question: if this chart from 2000 onwards is turned upside down, how does it compare to the chart of silver????

Thu, 03/22/2012 - 11:19 | 2280470 SheepDog-One
SheepDog-One's picture

Whats the bounce after the trence supposed to be, 'QE #Miracle'? 

Thu, 03/22/2012 - 11:21 | 2280473 Mike Cowan
Mike Cowan's picture

Boy! That chart does say it all.

Thu, 03/22/2012 - 11:23 | 2280481 Ralph Spoilsport
Ralph Spoilsport's picture

Scary chart is scary.

Thu, 03/22/2012 - 11:24 | 2280490 Comay Mierda
Comay Mierda's picture

muppets gotta keep up with the Jones'es!!

Thu, 03/22/2012 - 11:26 | 2280492 swanpoint
swanpoint's picture

that chart is giving the world the finger

Thu, 03/22/2012 - 11:26 | 2280494 A82EBA
A82EBA's picture

My 401 has these options: US treasuries (2, 5 & 7 yr), Bond Index managed by Blackrock, Gov Securities, TIPS, US Equities, US Small Company, International Equity, Emerging Mkts, and REIT. I can't withdraw so what should I be in?

Thu, 03/22/2012 - 11:54 | 2280567 Pairadimes
Pairadimes's picture

The fetal position.

Thu, 03/22/2012 - 12:14 | 2280623 Comay Mierda
Comay Mierda's picture

bend over, grab ankles with hands

Thu, 03/22/2012 - 12:35 | 2280688 DoChenRollingBearing
DoChenRollingBearing's picture

@ A82EBA

Maybe you can borrow (some, 10% - 15%, say) against it and buy some physical gold.  Then diversify the rest among some of the alternatives they offer you (but not long dated bonds IMO).

Thu, 03/22/2012 - 12:56 | 2280776 A82EBA
A82EBA's picture

I bought the phys 2 yrs back, was just trying to save what little fiat I could. Thank You Sir, I'll go back to the fetal pos now ;)

Thu, 03/22/2012 - 11:41 | 2280534 BandGap
BandGap's picture

Wow, from the above reference. I think my oldest (an engineer) is getting off lucky at 22K debt.

Thu, 03/22/2012 - 12:38 | 2280693 DoChenRollingBearing
DoChenRollingBearing's picture

Your post reminds me of the case of my daughter´s boyfriend, who had large student loans.  He went to work as an engineer, made DECENT money, and PAID OFF all his loans as soon as possible.  He lived very modestly to do that.  Now he is FREE!  And working for a start-up.  He is in control of his own life.  Bravo.

Thu, 03/22/2012 - 11:55 | 2280572 Blkhat117
Blkhat117's picture


Thu, 03/22/2012 - 11:55 | 2280573 hairball48
hairball48's picture
Neither a borrower nor a lender be; For loan oft loses both itself and friend
And borrowing dulls the edge of husbandry.

Good advice Polonius gave Laertes in Hamlet

Thu, 03/22/2012 - 12:40 | 2280699 flacorps
flacorps's picture

The advice of the fool. And it's foolish.

Thu, 03/22/2012 - 11:59 | 2280588 TruthDetector
TruthDetector's picture

Silver Bitchez!

Thu, 03/22/2012 - 12:02 | 2280598 SAME AS IT EVER WAS

All is fine, juuusst fine!

 Just go on out and buy yourself some shares of Home Depot. HD is saving us all from total meltdown, or at least the the dow index anyway. HD is the most bassakwards-filled to the gills with morons-junk pile of a peice of shit company and is the best performing stock in the dow30 index?? WTF!!! Does one get 50 shares Of Aig,freddie, and fannie with every of share of shit depot and I don't know about it? Talk about a FUCKED UP market!

Thu, 03/22/2012 - 12:07 | 2280612 Clashfan
Clashfan's picture

to enriched the few?

Thu, 03/22/2012 - 12:28 | 2280619 Sandmann
Sandmann's picture

U.S. economist Michael Hudson once fired Alan Greenspan, in 1966, 21 years before he became chairman of the U.S. Federal Reserve; “he was known as a hack that always gave ...his clients what they wanted instead of something actual.”[

His dissertation is not available from the university[14] since it was removed at Greenspan's request in 1987, when he became Chairman of the Federal Reserve Board. However, a single copy has been found, and the 'introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble'.

So why didn't Michael Hudson get to be Chairman of the Fed ?

Thu, 03/22/2012 - 12:29 | 2280670 goforgin
goforgin's picture

1. Michael Hudson is outspoken critic of bankers' credit money

2. He believes that labor should not be taxed: taxes should be levied only on land and unearned income

3. He is a proponent of MMT(Modern Money Theory)--Sovereign Nations should issue its own debt free money


Thu, 03/22/2012 - 12:19 | 2280621 goforgin
goforgin's picture

This chart does not show anything at all. Stock prices are not determined by consumer credit.

Thu, 03/22/2012 - 12:20 | 2280646 realtick
realtick's picture

You're missing the point.

Thu, 03/22/2012 - 12:34 | 2280686 goforgin
goforgin's picture

No! I am not. I am not a believer in Debt Saturation Theory, which to me simply means forced debt repayment at the expense of spending that benefits lower income classes.

Thu, 03/22/2012 - 12:37 | 2280691 Dre4dwolf
Dre4dwolf's picture

If people are using Credit less, that means that credit is contracting, contracting credit means less spending, less spending means people are not "extending" their own credit.


If people are not "extending their credit" that means that they are probably paying off debts, paying off debts means deflation, deflation means corporations cant sell their wares for inflated prices, if corporationsc cant sell their shit for inflated prices, that drives the cost of labor up relative to % of profits.

Less profitable corporations lay people off to stay profitable.

More people being let off means less people earning money, less people earning money means less people spending.

Less people spending means credit contracts and the cycle starts all over again in cascading waves.


The currency system is highly volatile, I suggest moving to a more sound currency from here on out . . . one that doesn't lose or gain value based on how much people are suffering.


Thu, 03/22/2012 - 12:11 | 2280622 Seasmoke
Seasmoke's picture

its all been a Mirage !

Thu, 03/22/2012 - 12:20 | 2280625 ebworthen
ebworthen's picture

Offshoring of corporate profits combined with bailouts of automakers, banks, insurance companies - anyone that wasn't a working class individual or family for the past four years.

National debt from $5 Trillion to almost $16 Trillion in four years.

Construction workers spent money on flat screen T.V.'s and iGadgets made in China that have a lifesan of 1-5 years.

2008 + 5 = 2013 Bullish?

We must need more home equity loans and higher credit card limits to "stiumulate" the solvency of the individual household because it appears that speculative leverage = income.

Thu, 03/22/2012 - 12:20 | 2280645 Monoki
Monoki's picture

Now this is a very simple and very informative post.  For bears, it shows how the expansion of consumer credit helped fuel stock prices.  But one can extropolate and expand this simple chart and premise to increasing sovereign debt since the 80s and its diminishing impact on economic output.  This is why permabears exist today, and I tend to agree over the longer term.  Yet permabears have been notoriously ill-prepared for any short/interim up-cycle in either economic output and resulting profits and rise in stock prices.  Bottomline: focus on the diminishing returns of credit and debt that fuels economic output.  This stimuli is less impactful and has a short live span that true economic outputs, which is innovation.

Thu, 03/22/2012 - 12:43 | 2280710 Dre4dwolf
Dre4dwolf's picture

Expansion of credit boosts stock prices, because stock prices have not changed at all in terms of valueation in real money (gold).


Stock prices stay stable.


Its the money that gains or losses value.


So when the money losses value (from people inflating the currency by charging shit on credit cards) the price of stock goes up from two forces.

1) The inflationary force (more money/credit) being put into circulation.... devaluing the money relative to the equities.

2) The inflation drives prices of goods up which allows corporations to give the "appearance" or delusion that they are profitable.


Making more money doesn't really mean you are more profitable, because your earnings are constantly due to debasement of the currency that you are earning.

Really, everyone is breaking even in the long run + / -  a few %.


The only way for a corporation to be "profitable" is to convert its earnings in dollars to real assets  (gold, silver, real estate, food, water, more businesses, more plant and equipment).

Thats why we are heading for hyper  inflation, because corporations are on the verge of figuring this out, that if they stuff their earnings into commodities they will be even more profitable than if they stuffed it into plant / equipment/ labor.


Thu, 03/22/2012 - 14:12 | 2281157 Monoki
Monoki's picture


Because in nominal terms many assets, real and financial, are up huge since the 1980s.  That's 30 years.  So even if your premise is correct, it would be half a life time staying on the sidelines and forgoing opportunities.  Question: am I'm willing to forego the opportunity to play this nominal game for returns or just sit on the sidelines?


Is gold a real asset and a monetary exchange mechanism in light of diminished confidence and inflating paper currency?  YES! (and don't let the Central Bankers of paper money tell you otherwise, for most of them are accumulating gold and silver).  And we're seeing this play out.  But to totally ignore and stand aside from rising nominal prices resulting from currency debasing, credit and debt leverage, would mean you missed quite a bit of returns.


Thus, the question we're all facing is when this modern-day strategy -- debasing currencies and fueling growth via leverage and debt -- plays out, and IF at all.  I think we're on the latter part of this and the current bears are more or less correct.  But if and when the bears reap the benefits of their belief, the S&P 500 might topple from...1700.  So, while I'm bearish over the longer term, staying on the sidelines is more a hindrance and forebearance of returns than playing within the 'system' until it ultimately fails, if at all.

Thu, 03/22/2012 - 12:24 | 2280655 Bubble
Thu, 03/22/2012 - 12:30 | 2280673 poor fella
poor fella's picture

That chart needs a decade or two to form a nice base.....

bummer for us

Thu, 03/22/2012 - 12:32 | 2280680 mark mchugh
mark mchugh's picture

While the article makes a lot of good points, it misses by asserting that the 80's and 90's were a "real bull market."

The last real bull market ended in 1966.

The primary driver of the 1980-2000 rally was the 401(k) laws which flooded Wall Street with pre-tax cash from people who didn't understand jack shit about investing.  Wall Street front-ran the flow for as long as they could.  It was their biggest, bestest bailout.

The returns of 401(k) investors never approached the nominal gains in the indexes.

Thu, 03/22/2012 - 12:59 | 2280796 blunderdog
blunderdog's picture

  The primary driver of the 1980-2000 rally was the 401(k) laws which flooded Wall Street with pre-tax cash from people who didn't understand jack shit about investing.  Wall Street front-ran the flow for as long as they could.  It was their biggest, bestest bailout.

The returns of 401(k) investors never approached the nominal gains in the indexes.


That's the sound of the nail being hit squarely on the head.  That's the source of the funding for the FIRE takeover of the US economy.

Worth repeating.

Thu, 03/22/2012 - 14:15 | 2281170 mark mchugh
mark mchugh's picture

Thanks Blunderdog,

I've been trying to impress that simple point on people for years now and few want to see it.  Before we take down the safety nets maybe somebody should verify that the proposed replacement works.

This graphic shows how well it really works:



Thu, 03/22/2012 - 13:17 | 2280863 KickIce
KickIce's picture

I would agree about the 60's, everything since has been through money printing, debt and an increase in government and government spending.  We've sacraficed our manufacturing sector in favor of services.  The government has created huge bubbles to create an illusion of prosperity.  We've used government agencies to further our agendas, traffice drugs and launder money.

We had to be in deep shit to leave the gold standard.  Do your really think turning to paper changed that in any real terms.

Thu, 03/22/2012 - 14:20 | 2281204 mark mchugh
mark mchugh's picture

Everybody wants an easy scapegoat, but it's actually a process that been snowballing for far longer than most dare imagine.

Thu, 03/22/2012 - 12:51 | 2280744 regionswork
regionswork's picture

That was the "end of history bull market" where Bain Capital et al shipped our manufacturing capacity off shore for a few pennies. Those laid off from downsizing agreed because it increased the value of their IRAs. Every household became a business and debt was good. No savings, only home equity and 401(k) value. We were all in "Fast Company" and mouse clicks would lead to $ millions. You could run a balloon store at the mall.

This thinking was fed by Julian Simon's (from Wikipedia) "1981 book "The Ultimate Resource" is a criticism of what was then the conventional wisdom on population growth, raw-material scarcity and resource consumption. Simon argues that our notions of increasing resource-scarcity ignore the long-term declines in wage-adjusted raw material prices. Viewed economically, he argues, increasing wealth and technology make more resources available; although supplies may be limited physically they may be viewed as economically indefinite as old resources are recycled and new alternatives are assumed to be developed by the market. ... Simon argues that population is the solution to resource scarcities and environmental problems, since people and markets innovate. " Julian Lincoln Simon (February 12, 1932 – February 8, 1998)

This seemed to work for a while, but resource limits have come back and that ultimate resource of more minds collaborating to solve the problems with human creativity has not delivered. 

The debt bets on it expanding wealth were wrong, so we're hobbled going forward, but not yet contrite.

It might be time to acknowledge that the forces in the natural environment do not respond to beliefs created by human intelligence. Economics should have been able to figure that out, but it got psyched by short term trends and visions of a Jetsons' future. It was hard to listen to the few mature adults.

High quantitative growth has been in many respects an illusion. I think the new future is qualitative: more music, less real income.

About that debt, ... it seems human civilizations have been here before. Some answers are in the past, but the "ultimate resource" needs to collaborate if we want to ease down. Necessity calls for a new age of human unity and cooperation, a collaborative network of human communities that competes to strengthen, not dominate.

Who really knows what challenges we've created for ourselves? 

Thu, 03/22/2012 - 13:40 | 2280992 daxtonbrown
daxtonbrown's picture

I get a chart that is not dissimilar to this guys, which I call the Biflationary Index, It shows us doing well in the 50s, peaking in about 70, declining to the Carter years, then slowly moving up. I show the peak though in 2005, well before the 2009 crash. Ominously, my chart hasn't bottomed yet.

Thu, 03/22/2012 - 14:16 | 2281175 gcjblack
gcjblack's picture

Interesting graph, to be sure.  Personally, I think we will be slowly going down, month by month, towards a Great Depression (or equivalent to 1929 in pain levels), then it will get a whole lot worse; hitting bottom in about 30 years from now.

However, how do we explain 1960 - 1975 on this graph?

Could somebody not have saidthe exact same thing in 1960?  The world didn't vaporize then.

I'm not convinced by this graph till this gets adequately explained.

Thu, 03/22/2012 - 14:49 | 2281294 e-recep
e-recep's picture

even the babyboomers can be seen on this chart. that's when the curve reaches its peak. only the husband worked, the wife stayed at home, looked after the kids and cooked. they could afford a large house and still be able to hoard lots of money in their savings account. no wonder they made lots of babies.

compared to that, our lives today can only be described as miserable and despicable.

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