Key Debt Points
In 1984 it took $1 of additional debt to create an additional $1 of Real GDP.
As of the fourth quarter of 2018, it took $3.8 dollars to create $1 of real GDP.
As of 2013, it took more than a dollar of public debt to create a dollar of GDP.
If interest rates were 3.0%, interest on total credit market debt would be a whopping $2.16 trillion per year. That approximately 11.5% of real GDP year in and year out.
Total Credit Market Debt Detail
Tiny Credit Drawdown, Massive Economic Damage
Note the massive amount of economic damage caused by a tiny drawdown in credit during the Great Recession
The Fed halted the Great Recession implosion by suspending mark-to-market accounting.
What will it do for an encore?
?Choking on Debt
The Fed desperately needs to force more debt into the system, but the system is choking on debt.
That's the message from the bond market.
One look at the above charts should be enough to convince nearly everyone the current model is not close to sustainable.
Housing Bubble Reblown
How the heck are millennials (or anyone who doesn't have a home) supposed to afford a home?
Despite the fact that Existing Homes Prices Up 88th Month, the NAR Can't Figure Out Why Sales Are Down.
Negative Yield Ponzi Scheme
So far, all of this negative-yielding debt is outside the US.
The ECB made a huge fundamental mistake. Whereas the the Fed bailed out US banks by paying interest on excess reserves, the ECB contributed to the demise of European banks, especially Italian banks and Deutsche by charging them interest on excess reserves that it forced into the system.
The demographics in Europe and Japan are worse than the US.
We are very close to the tipping point where the Fed can no longer force any more debt into the system. That's the clear message from the bond market.