{"id":8878,"date":"2015-06-06T08:05:05","date_gmt":"2015-06-06T13:05:05","guid":{"rendered":"http:\/\/olduvai.ca\/?p=8878"},"modified":"2015-06-06T08:05:05","modified_gmt":"2015-06-06T13:05:05","slug":"as-goes-the-credit-market-so-goes-the-world","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=8878","title":{"rendered":"As Goes The Credit Market, So Goes The World"},"content":{"rendered":"

As Goes The Credit Market, So Goes The World<\/a><\/h3>\n
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When confidence cracks, we’ll see it there first<\/strong><\/div>\n<\/div>\n<\/div>\n<\/div>\n

During the prior economic cycle of 2003-2007, one question I asked again and again was:\u00a0Is the US running on a business cycle or a credit cycle?<\/em><\/p>\n

That question was prompted by a series of data I have tracked for decades; data that tells a very important story about the character of the US economy. Specifically, that data series is the relationship of total US Credit Market Debt relative to US GDP.<\/p>\n

Let\u2019s put this in simple English. What is total US Credit Market Debt? It’s an approximation for total debt in the US economy at any point in time. It\u2019s the sum total of US Government debt, corporate debt, household debt, state and local municipal debt, financial sector and non-corporate business debt outstanding. It’s a good representation of the dollar amount of leverage in the economy.<\/p>\n

GDP is simply the sum total of the goods and services we produce as a nation.<\/p>\n

So the relationship I like to look at is how financial leverage in the economy changes over time relative to the growth of the actual economy itself. Doing so reveals an important long-term trend. From the official inception of this series in the early 1950\u2019s until the early 1980\u2019s, growth in this representation of systemic leverage in the US grew at a moderate pace point to point. But things blasted off in the early 1980\u2019s as the baby boom generation came of age. I find two important demographic developments help explain this change.<\/p>\n

First, there’s an old saying on Wall Street:\u00a0People don’t repeat the mistakes of their parents. Instead, they repeat the mistakes of their grandparents.<\/em>\u00a0From the early 1950\u2019s through the early 1980\u2019s, the generation that lived through the Great Depression was largely alive and well, and able to \u201ctell\u201d their stories.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

As Goes The Credit Market, So Goes The World When confidence cracks, we’ll see it there first During the prior economic cycle of 2003-2007, one question I asked again and again was:\u00a0Is the US running on a business cycle or a credit cycle? That question was prompted by a series of data I have tracked […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[88,6182,98,124,175,176,5869,195,246,353,431,2218,860],"class_list":["post-8878","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bonds","tag-brian-pretti","tag-business-cycle","tag-central-banks","tag-credit","tag-credit-cycle","tag-credit-market","tag-debt","tag-economy","tag-gdp","tag-interest-rates","tag-peak-prosperity","tag-wall-street"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/8878","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8878"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/8878\/revisions"}],"predecessor-version":[{"id":8879,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/8878\/revisions\/8879"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8878"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8878"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8878"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}