In every annual budget debate since the 1980s, one side figures out that the way to get what it wants – which is higher spending – is to frame the request in a particular, ingenious way: We have to borrow and spend way more now if we want to borrow and spend way less later. […]
Modern Delusions, Part 1: Japan Thinks It Can Balance Its Budget
A recurring problem for most developed-world governments is explaining why last year’s plan didn’t work while convincing voters that this year’s new and improved plan will do the trick. This is especially tough when the new plan is pretty much the same as the old one and therefore just as likely to fail. Let’s take […]
Debt Surge Producing Fake Recovery
What do the following headlines have in common? US wages grow at fastest pace since 2009 Euro area economy ended year with strongest growth since 2011 Surge in home prices is beating the one in mortgage rates Manufacturing in U.S. Expands at Fastest Pace in Two Years German Inflation welcomed back Obviously they’re all favorable, […]
Another Election Year, Another Bunch Of Fake Growth Numbers
Some pretty good economic reports have energized various parts of the financial markets lately. Consumer spending is up, GDP is exceeding expectations and even factory orders, that perennial downer, popped this morning. In response the dollar is soaring and interest rates are at breaking out of their multi-decade down-channel. The economy is clearly recovering, implying […]
Developing Countries Emulate The US, Turn Citizens Into Debt Slaves
One of the big advantages of being a Latin American or Asian country used to be — somewhat counter-intuitively — the lack of credit available to most citizens. The banking system in, say, Brazil or Thailand simply wasn’t “advanced” enough to offer credit card, auto, or mortgage loans on a scale sufficient to turn the […]
Japan Is First To Panic; Won’t Be The Last
The most widely-reported result of the recent G-7 meeting was Japan’s attempt to convince the other major economies to admit that a crisis is imminent and take appropriately radical steps. The response seems to have been a bunch of blank stares. As India’s Business Standard noted: G7 pact offers minimal cover for Abenomics reset A […]
Consensus Forming: China Heading Back Into Financial Crisis
China’s historic post-2009 debt binge flew largely under the radar — fooling most observers into thinking the global economy was recovering rather than just re-leveraging. Now Beijing is back at it, borrowing over $1 trillion in this year’s first quarter, buying up commodities and creating the illusion of global growth. But this time the scam […]
This Is How They Fool Us, China Edition
So it seems that China’s economy, caught in the grip of a credit crisis just a few months ago, is all better. And so, by extension, is everyone else. As the Wall Street Journal explains it: China Calms Anxiety With Economic Fixes WASHINGTON—The world’s financial leaders started the year worried about China’s decelerating economy dragging […]
Here We Go Again: Government Ramps Up Borrowing As Private Sector Slows
This morning, US existing home sales plunged and the Chicago Fed’s national activity index turned negative. Both are obvious signs of a slowing economy. Anticipating this kind of news, Credit Bubble Bulletin’s Doug Noland in his most recent column analyzed the Federal Reserve’s quarterly Z.1 Report for signs of changing financial trends, and found something […]
Is This The Debt Jubilee?
Not so long ago the financial world viewed certain numbers as limits beyond which lay trouble. Interest rates near zero, for instance, were thought to risk destabilizing the banking system. And government fiscal deficits above 3% were considered so dangerous that exceeding this level was prohibited by the Maastricht treaty that all eurozone members were […]
Is Anybody NOT Deeper In Debt?
The New York Federal Reserve just announced that older Americans are carrying more debt than ever before and, believe it or not, spins this as a good thing: New York Fed Finds Large Increase in Debts Held by Those Over Age 50 (NASDAQ) – Americans in their 50s, 60s and 70s are carrying unprecedented amounts […]
Screwed By The System, With No End In Sight
Bloomberg just cited some stats that validate the average American’s sense of being ripped off: Here’s How Much QE Helped Wall Street Steamroll Main Street Wall Street is counting its winnings from seven years of easy money. In a report sent to clients on Sunday, Bank of America Corp. strategists totted up the results of […]
If Debt Was The Problem…
Confounded Interest just posted a nice summary of a McKinsey report on the growth of global debt during what some persist in calling the “great deleveraging.” Turns out that since the crisis of 2008, debt has actually risen by $57 trillion, and the ratio of debt to GDP is up 17 percentage points to 286%. […]
Debt Makes You Dumb, Part 2: Borrowing Just To Get By
As incomes stagnate and prices rise, a growing number of Americans face a tough choice: either descend a couple of rungs on the lifestyle ladder or borrow to keep it together. Many are apparently choosing door number two. From MarketWatch: Americans are getting into debt to afford food, gasNowhere has the unequal nature of the […]
Debt Makes You Dumb, Japanese Edition
Debt works the same way for countries as for families and individuals. That is, if you borrow too much, your life begins to suck. And actions that in normal times might have seemed unwise, contradictory or downright stupid begin to look better than the (even more disturbing) alternatives. Pretend, for example, that you are Japan. […]