Chart of the Day
I'm not sure what to say about this. CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, January 09, 2009
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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9 Comments:
Be scared. Very scared.
If Fannie Mae rolls out their short sale program nationwide, I would think this ratio could drop as people who otherwise were not going to sell take advantage of the opportunity to reset their debt-to-equity ratio.
What happened in the mid 80s to change the slope?
Wow, I'd say we're in for a bit of a reset ... maybe similar to the one in the early 90's.
As John Bogle always refers to "reversion to the mean", it looks like we are heading south. I believe the result of loose monetary policy. The FED could put as much money and credit out there but I think people are burned out and will, hopefully, live within their means. Hold on it's going to be a rough ride.
I don't think that you can say anything meaningful about this Mark. GDP doesn't exclude the huge growth in domestic companies growing overseas. Yet, these same companies are borrowing to pursue overseas opportunities so the debt is being counted.
- Eric Tyson
Syndicated Columnist
Best-selling author of Personal Finance for Dummies
Around 1982, the Information Revolution accelerated, the Baby-Boomers entered "prime-age" the U.S. became an "open economy" (where international trade accelerated), the U.S. shifted from a creditor to debtor country, and the Reagan Revolution (supply side economics) began. There was a period of strong disinflationary growth from 1982-00, which paralleled with the U.S. Baby-Boomers entering prime-age.
Those factors contributed to a steeper rise in U.S. living standards. From 2000-02, there was a quick and massive Creative-Destruction process, which made Information-Age firms much more efficient (i.e. producing more output with fewer inputs). It also destroyed nominal wealth (rather than real wealth), because the U.S. economy cannot support too many people retiring early. So, workers had to work longer, which added to future economic growth and postponed retirements.
In the 2000s, U.S. living standards rose at the steepest rate, in part, because of diminished marginal utility, i.e. cheaper capital and goods continued to induce demand, which increased debt. U.S. households continued to accumulate enormous real assets and goods at increasingly lower costs and prices. The U.S. economy in the 2000s can be viewed as a Black Hole, attracting assets and goods from the global economy, and then attracting the foreign owners of that capital themselves.
How about HT: Karl Denninger?
http://market-ticker.org/uploads/usdebt.serendipityThumb.jpg
The chart looks worse the farther back in history you go.
The only thing we have to fear, is how to keep our own money form being stolen by our Government.
Obama said only Government can get us out of this mess.
California and Michigan are great examples of what NOT to do.
We are about to blow 1.8 Trillion Dollars, 600 Billion looted from SSI. We will fix nothing. No new Nuke Power Plants, Refineries, or Drilling for the vast Oceans of Domestic Oil.
Should our economy recover by money stolen from the people and spent by a socialist Government. Energy prices will throw us right back into economic woes.
After all of this. We will continue to demand our Blue Collar work force compete with third world labor in our own Country for jobs.
Hotrod.
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