Long-Term Economic Question 2

Will Debt End U.S. Capitalism?
Analysis: Positive, Negative, Predictions

1. Will Inflation/Growth Tame the Deficit      3. Jobs Loss to AI Growth

Dollar Privilege Continuation     5. Disposition of Illegal Immigrants

 Created 7/23/18   Please link to ,use as textbook/supplement, and share.

Analysis Pessimistic

S&P Margin Debt Up

Government Debt Up

Corporate Debt

Consume Debt
Very High

World Debt Up



Profits Up, Market Up

FED Printed Works


FED Correct to Tighten?

Train Crash Debt Series



Pessimistic Analysis


Stock Market Debt Has Exploded



Stock Market Borrowing at All Time High, Increasing Risk of Downdrafts

see just-around-the-bend-this-is-when-the-stock-market-will-crash-according-to-5-famous-investors/


Government Debt High, Especially for Peacetime

Image result for US Public vs Private debt graphs




Local Governments Looking Buy Now Pay Later Financing



Corporate Debt

New Peak

Refinancing Peaks in 2022


Higher Rates Will Hurt Refinancing


High Grade Bonds Losing Value

Market Ignore Much as Junk Bonds Continue to Gain Value


nakedcapitalism.com riskiest-junk-bonds-completely-blow-off-fed-face-sudden-reckoning.html


Record Consume Debt

Household Debt Continues Its Increase in the First Quarter of 2018

Image result for Real US debt correlated to inflation graph

Some feel interdependency of housing across cities and countries could lead to contagion.
 see Global Financial Stability Report-4/18


Student Debt



World Debt Continues to Grow


Secondary Source



Profits Up, Market Up


New Tax May Benefits Many Corporations



FED Printing Worked
US Recovered from Great Recession



FED Bought Much of Great Recession Debt
Softening Blow to those Holding Debt

Most Countries Borrow More

Source The Economist



global wealth chart



1. FED Correct to Tighten?

Crescat Capital Quarterly Investor Letter 1/18

2. Train Crash Debt Series 5/13/18

1. Credit-Driven Train Crash   
2. Train Crash Preview   
3. High Yield Train Wreck
4. The Italian Trigger
5. Debt Clock Ticking

6. The Pension Train Has No Seat Belts
7. Europe Has Train Wrecks, Too

Unfunded Promises
 9. The Debt Train Will Crash

"Huston," We have two related problems.

Corporate debt and especially high-yield debt issuance has exploded since 2009.

Tighter regulations discouraged banks from making markets in corporate and High Yield debt.

Both are problems but the second is worse. Experts tell me that Dodd-Frank requirements have reduced major bank market-making abilities by around 90%.  For now, bond market liquidity is fine because hedge funds and other non-bank lenders have filled the gap. The problem is they are not true market makers. Nothing requires them to hold inventory or buy when you want to sell. That means all the bids can “magically" disappear just when you need them most. These “shadow banks" are not in the business of protecting your assets. They are worried about their own profits and those of their clients.

A “new class" of investors he mentions are corporate bond ETF and mutual fund shareholders. These funds have exploded in size (high yield alone is now around $2 trillion) and their design presumes a market with ample liquidity. We barely have such a market right now, and we certainly won’t have one after rates jump another 50 - 100 basis points.

To make matters worse, many of these lenders are far more leveraged this time. In fact, 77% of corporate bonds that are leveraged are what’s known as “covenant-lite." [where] the borrower doesn’t have to repay by conventional means. ... [and] force the lender to take more debt. Normally [higher rates] this would be the borrowers’ problem, but covenant-lite lenders took it on themselves



3. Subprime Debt Analysis

Subprime Chaos


Related Stuff

Chart D.15f: Federal Debt Gross and Net



The US federal government differentiates between Gross Debt issued by the US Treasury and Net Debt held by the public.

The numbers on Gross Debt are published by the US Treasury here.

Numbers on various categories of federal debt, including Gross Debt, debt held by federal government accounts, debt held by the public, and debt held by the Federal Reserve System, are published every year by the Office of Management and Budget in the Federal Budget in the Historical Tables as Table 7.1 — Federal Debt at the End of the Year. The table starts in 1940. You can find the latest Table 7.1 in here.

The chart above shows three categories of federal debt.

1. Monetized debt (blue), i.e., federal debt bought by the Federal Reserve System

2. Debt held by the federal government (red) e.g., as IOUs for Social Security

3. Other debt (green), i.e., debt in public hands, including foreign governments.



Will Great Recession Pause Continue?




Short-term Questions 
Trump Keeping Economy In Good Shape?    2. Will Trump Tax Cuts Work?   3. Inflation Is Back, Is There Going To Be Trouble?  
Stock Market Too High?  
5. U.S. Headed for Recession? 

Longer Term Economic Questions
Will Inflation/Growth Tame the Deficit   2. Will Debt End Capitalism?   3.
Jobs Loss to AI Growth
Dollar Privilege Continuation   5. Disposition of Illegal Immigrants   Free Book of the Semester   Great Recession: Historical Perspective