Total Credit Market Debt Owed Has Grown Just 16% In 6 Years, The Smallest Increase On Record

Between July 2007 and July 2013, total credit market debt owed (TCMDO) has grown just 16%, by barely $8 trillion. It's the smallest increase on record for any six year period going back to when the data series begins in October 1949.

Going back six years from 2013 is instructive because the summer of 2007 was when the level of TCMDO last doubled (going back to the summer of 1999), and if you go back to the beginning of the data series you find doubling times of as few as 6 years in length to as many as almost 12. In other words, in a period of rapid credit expansion TCMDO might have conceivably doubled in our last six year period, but it hasn't. We sure could have used it. Instead it has for all intents and purposes collapsed, growing just $8 trillion from $50.032 trillion in 2007 to $58.082 trillion now.

From humble beginnings in 1949 when TCMDO stood at $400 billion, the level went on to double in the summers of 1961, 1970, 1977, 1983, 1989, 1999 and 2007. In order to double again (to a level of $102 trillion) by, say, 2019 (12 years from 2007), we're going to have to pick up the pace just a little . . .. Unless, of course, this debt-based economy has reached the limits of what it can do, which may be what the last six years is trying to tell us. 

Here's the data for TCMDO for the six year periods going back to July 1953:

7/1/13 $58.1 trillion (up  16%)

7/1/07 $50.0 trillion (up  74%)

7/1/01 $28.8 trillion (up  58%)

7/1/95 $18.3 trillion (up  45%)

7/1/89 $12.6 trillion (up 102%)

7/1/83 $06.3 trillion (up  97%)

7/1/77 $03.2 trillion (up  87%)

7/1/71 $01.7 trillion (up  57%)

7/1/65 $01.1 trillion (up  49%)

7/1/59 $00.7 trillion (up  42%)

7/1/53 $00.5 trillion.

As Ambrose Evans-Pritchard formulated it in 2011, "debt draws forward prosperity". In other words, we've already enjoyed the prosperity years ago which should be present today by literally pulling it back there from here, and now that we're here, well, there's nothing here, except for a measly 0.97% real average GDP report for the six years 2007-2012.

Time to pay.

Q3 2013 GDP Third Estimate At 4.1%, But Inventories Constitute 41% Of That

The BEA reports here:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.1 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the "third" estimate released by the Bureau of Economic Analysis.  In the second quarter, real GDP increased 2.5 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued on December 5, 2103.  In the second estimate, the increase in real GDP was 3.6 percent (see "Revisions" on page 3).  With this third estimate for the third quarter, increases in personal consumption expenditures (PCE) and in nonresidential fixed investment were larger than previously estimated. ...  The change in real private inventories added 1.67 percentage points to the third-quarter change in real GDP, after adding 0.41 percentage point to the second-quarter change. Private businesses increased inventories $115.7 billion in the third quarter, following increases of $56.6 billion in the second quarter and $42.2 billion in the first.

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That's a huge inventory number compared to the recent past.

Personal consumption expenditures, which in the second estimate came in at a paltry 1.4%, suddenly are revised up 0.6 to 2.0% in the third estimate, also contributing significantly to the up revision of GDP. In the second estimate it looked like the consumer was pulling back by over 20% from the second quarter. In the third estimate it now appears the consumer ramped it up by over 10% in Q3 compared to Q2, quite the reversal.

Someone wanted to go home early: Both reports in html and pdf say "December 5, 2103".

Hey. They're just numbers. Time for a beer. 

Barack Obama's Unemployment Record Is Now Worse Than Reagan's

Having grown up in the 1960s and lived through the terrible employment situation which prevailed in this country off and on from 1975 arguably through 1996, Barack Obama now owns the dubious distinction of a worse unemployment record than even Ronald Reagan's, and that's saying something.

From the time of Reagan's election in November 1980 right on through December 1985, unemployment stayed at or above 7% for 61 straight months, with an average report of unemployment coming to 8.31%. The severity of it was highlighted in 1981 and 1982 by a string of ten months with unemployment in excess of 10%. It was a brutal time, especially for older workers with homes and families whose dreams for the future were arrested, and for young people who had to start their careers at the very bottom, just as many of their depression-era parents had had to do.

Hard as it may be to believe, unemployment under Barack Obama is now even worse than it was under Reagan. Obama's average report of unemployment over the last sixty months, none of which has been lower than 7%, the same as the case with Reagan but short of one month (we'll see if the 7% threshold is broken in the December figures come January), now stands at an incredible 8.67% even though there's been only one month, October 2009, at 10%. Combined with the housing, stock market and banking collapses, a bona fide if small depression with negative GDP in 2008 and 2009, and a much older, less adaptive population, the impact of unemployment on the psyche and fortunes of the nation this time around is understandably more acute.

From the long term perspective, unemployment took a systemic turn for the worse in America since the mid-1970s, shortly after we adopted the free trade mania which has done nothing except create a middle class abroad at the expense of the middle class at home. Our chief export has been the prosperity of the nation's vast middle, chiefly through housing which Bill Clinton and Newt Gingrich helped Americans tap like an ATM to buy goods, mostly made abroad. Owner's equity in housing is half what it used to be in this country, squandered away by the squanderers, the Baby Boom.

If you want America to continue to exist, fix that by forcing people to save again, since no one seems to know how to do so for themselves, for the obvious reason. It doesn't really matter how we do it, but do it we must, or it's curtains.

(view the chart here at The Wall Street Journal)

Second Estimate Of Q3 2013 GDP Rises To 3.6% From 2.8% In The Initial

The report from the Bureau of Economic Analysis is here, showing Q3 2013 real GDP growing at a 3.6% clip. 

1.68 points of the 3.6, however, represents building of massive inventories, meaning the underlying rate is 1.9%, down from last month's 2.0% after stripping out inventories. The first estimate of inventories had been off by 100%.

Falling demand from consumers in the third quarter was indicated as personal consumption expenditures (PCE) grew at a rate 0.4 lower, at 1.4% vs. 1.8% in the second quarter, a drop of 22%. In the first estimate PCE had been estimated at 1.5% in the third quarter. The decline confirms the ongoing weakness of the consumer economy.

GDP For Q3 2013 At 2.8% Annualized In The First Estimate, Released Today

click to enlarge

The report in pdf from the Bureau of Economic Analysis may be found here.

The average report of GDP in 2013 now stands at 2.13% (1.1%, 2.5% and 2.8%), while growth measured in the 3rd quarter on an annualized basis is running at 2.8%.

Assuming GDP in the third and fourth quarters finishes sufficiently strongly enough to lift the year to a growth rate of 2.8% overall when next year's final estimate of GDP for Q4 2013 is complete, Obama's five year record will be an average report of 1.4%, still the lowest in the post-war behind George W. Bush's 2.1%.

But that assumption may be too rosy.

The GDP range for 2013 projected by the Federal Reserve in its June report is just 2.3% to 2.6%, so it remains very possible that 2013 GDP will finish the year at something less than the current 2.8%, especially as the ObamaCare Tax, in the form of higher health insurance premiums and other taxes, whacks the only people with the spending money in this economy.

Federal Reserve GDP Projections For 2013 From June 2011, 2012, 2013

In June 2011 the Fed's forecast for 2013 GDP was for between 3.5% and 4.2%.

In June 2012 the forecast was reduced to between  2.2% and 2.8%.

And in June 2013 the forecast has narrowed to between 2.3% and 2.6%.

Quarters one and two in 2013 have reported annualized GDP at 1.1% and 2.5% respectively.

Quarter three reports on Thursday for the first time, delayed from late October due to the government shutdown.

The comprehensive revision of GDP going back decades which came out this last summer reported average annual real GDP at 3.3% between 1929 and 2012, and at 3.4% from 1959 to 2002.

Current GDP of 2.5% is therefore running about 24% below the long term trend.

Janet Yellen's Crystal Ball Utterly Failed Her In May 2007: She Never Saw The Crisis Coming

(as always, click on the image to enlarge)

“Taking a longer view, I anticipate real GDP growth over the next two and a half years [2008 & 2009] of about 2.6 percent, just a bit below my assessment of potential. My forecasts of both actual and potential growth are a tenth or two stronger than the Greenbook forecasts; but the basic story is very similar, and the underlying assumptions, including the path for the nominal funds rate, are essentially the same. I view the stance of monetary policy as remaining somewhat restrictive throughout the entire forecast period. The key factors shaping the longer-term outlook include continued fallout from the housing sector, with housing wealth projected to be roughly flat through 2008. Given the reduced impetus from housing wealth, household spending should advance at a more moderate pace going forward than over the past few years.” (Quoted here)

10-Year Treasury Rate Ends The Week At 2.64%

The 10-year US Treasury Rate ended the week at 2.64%, 43% below the mean level going back to 1871.

Despite the best efforts of the US Federal Reserve to suppress interest rates on behalf of other "investments" like housing and stocks, the current rate of the 10-year Treasury still bests the dividend yield of the S&P500 by 34%, which ended the week at 1.97%. From another perspective, it's even worse than that.

John Hussman noted this week here that based on the ratio of equity market value to national output, you might expect less than zero from the S&P500 going ten years out: 

Likewise, Buffett observed in 2001 that the ratio of equity market value to national output is “probably the best single measure of where valuations stand at any given moment.” On that front, the chart below [follow the link above] shows the value of nonfinancial corporate equities to GDP (imputed from March to the present based on changes in the S&P 500). On this measure, the likely prospective 10-year nominal total return of the S&P 500 lines up at somewhere less than zero. Suffice it to say that our estimates using both earnings and non-earnings based measures suggest a likely total return for the S&P 500 over the coming decade of less than 2.9% annually, essentially driven by dividend income, and implying an S&P 500 that is roughly unchanged a decade from now – though undoubtedly comprising a volatile set of market cycles on that course to nowhere.

In other words, it's possible stocks could return absolutely nothing over the next decade, or just barely beat bonds by less than 10% based on the current 10-year Treasury rate. For sleeping soundly at night, the choice is easy.

The 10-year Treasury rate has backed off about 10% since Ben Bernanke reversed himself on tapering bond purchases this month, seeing how it was knocking on the door of three.

Normalization of the 10-year yield would cost the US government dearly, jacking up interest expense costs over time which are paid from current tax revenues, by nearly double. In the last four years under Obama, interest payments on the debt have averaged $403 billion annually. Increasing those payments 43% would add another $173 billion to budgetary requirements, again, not all at once but over time.

Q2 2013 GDP 2.5% Annualized In 3rd Estimate, Nearly 11% Lower Than In 2012

The full GDP report from the BEA is here.

Subdued growth in the last three quarterly reports, 0.1% for the last quarter of 2012, 1.1% in Q1 and now 2.5%, in part reflects on-going effects from Hurricane Sandy last November, little remarked in the press since then probably because of all the heat Obama got in 2011 for blaming exogenous events for poor GDP performance, but correctly forecast by Rosie in the instance.

Since about 25% of GDP is government spending at any given time, the real economy is piddling along at about 1.88%.

Obama's Appallingly Bad GDP Reports For The Last 3 Quarters Average +1.23%

Revised GDP Q2 2013 was reported this morning UP at 2.5% from 1.7%. Q1 remains at 1.1% and Q4 2012 remains at 0.1%

Truly abysmal figures, despite the revision.

The news release from the BEA is here:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the second quarter of 2013 (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.7 percent. With this second estimate for the second quarter, the increase in exports was larger than previously estimated, and the increase in imports was smaller than previously estimated (see "Revisions" on page 3).

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A rate of 2.5% in Q2 is much better than 1.7% to be sure, but hardly commensurate with a recovery. The last three quarters now yield an average report of 1.23% instead of 0.97% prior to today's revised report. Woo Hoo! Compared to 2.8% for all of 2012, Obama's best year (cough), the 2013 figures which yield an average report of 1.8% to date are also appallingly bad.

This would be a good time for the president to begin doing his job, except he has no clue what it is. 

most recent quarterly figures

most recent annual figures

Under Harry Truman Federal Spending Was Slashed More Than Two Thirds

Between fiscal years 1945 and 1948 inclusive federal spending declined 67.85%, from $92.7 billion in 1945 to $29.8 billion in 1948. By the end of fiscal 1952 spending increased back up to $67.7 billion, but still 27% lower than in 1945.

Real GDP declined 9.4% from January 1945 to January 1949, but rebounded 28% by the time he left office four years later.

Who says we can't cut the size of government dramatically and still grow like gangbusters?

Kudlow Is Right That Obama's Glorious Immediate Post-War Never Existed, But Completely Misses The Spending Cut Angle

Larry Kudlow, here:

[S]peaking in Galesburg, Ill., this summer, Obama served up a convenient historical fairy tale: "In the period after world War II," he said, "a growing middle class was the engine of our prosperity." Presumably he was thinking of a time when high taxes on the rich and industrial-union rule had the middle class soaring. The trouble is, Obama's history is wrong.

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Arguably, government spending cuts were the engine of post-war prosperity.

While Truman's record is second only to JFK/LBJ for real GDP growth in the post-war period, it occurred under special circumstances of extraordinarily deep government spending CUTS, which is little appreciated today when politicians and Keynesian and monetarist economists stress the importance of government spending for GDP. The truly remarkable thing under Truman is how the economy soared as spending decreased by TWO THIRDS from 1945 to 1947, as Arnold Kling reminded us here last year. Funny how Kudlow doesn't mention this. I guess they don't teach that at Princeton.

Under Truman's successor Eisenhower, real GDP growth slowed dramatically because of onerous levels of taxation maintained primarily to retire the war debts, but Eisenhower spent almost as frugally as Truman at the same time, making them the two best presidents we've had when it comes to small increases in the US public debt. That said, only the two Bush presidents and Obama have turned in poorer GDP performances than IKE. Funny also how Kudlow mentions only the one Bush. He leaves out the other one. You know, the "read my lips . . . no new taxes" Bush who ended up raising taxes.

Interestingly enough for US public debt growth, JFK/LBJ come in right behind Truman and Eisenhower while introducing the tax cuts which might have made Eisenhower's GDP record better than it was. Despite the guns and butter era under LBJ, the presidents occupying The White House between 1945 and 1968 were the most fiscally responsible we've had in the post-war, and it was a dramatic resetting of the baseline for spending LOWER under Truman which was the foundation of that period's economic growth.

Ben Bernanke Is A World Class Thief And Should Be In Jail

The average annual return to cash for the three years since July 2010 has been 0.04%, for example in VMMXX, Vanguard's Prime Money Market Fund, but over that three year period inflation has absolutely raged at 7.18% overall, with the all items CPI soaring to 232.944 from 217.329. With about $10 trillion stuffed away in M2, returns to cash just keeping pace with inflation would have come to $718 billion to savers by now. Instead they've reaped just $4 billion (annually).

In a related note here, the contribution to GDP over the period from the Zero Interest Rate Policy and Quantitative Easing has mirrored the criminal returns to cash:

'But it turns out that the benefits of printing all that new money may have been negligible. According to a new study by two senior US economists, America's second programme of quantitative easing, nicknamed "QE2", boosted economic output by just 0.04pc.'

The rich have gotten richer the old fashioned way: they've stolen it.

The Kookiest Jobs Story In Months: Republican House Ways And Means Tallies Just 270k Full-Time Since 1-09

Story here.

What's next, 911 really was an inside job? Paul McCartney did die?

To believe this number you have to believe all the numbers reported all the time by the Bureau of Labor Statistics have been wrong for 4.5 years and that everyone who works there is content to keep a secret, and can, but I'll bet you those are precisely the numbers House Ways and Means have been "crunching" to arrive at the "truth". 

I realize John Crudele at The New York Post is fond of that skeptical pose now that a former BLS official has been talking to him about his skepticism about the numbers, but really, have we all gone off the deep end in order to drive home a political point about what ObamaCare is going to do to the nature of work in America when it's not really yet self-evident? For example, average hourly earnings should be plummeting if Ways and Means is right, but they are not. Wages are up nearly 1.9% in the last year. Nothing to write home about, but completely dispositive of the thesis.

As usual the devil is in the details, which in this case means the word "net", as in net total. Well, net from what benchmark? The all-time high of full-time at 123.219 million under George Bush? Full-time isn't anywhere near recovering to that level, so it's impossible that for the Republicans net means net above the all-time high by the paltry sum of 270,000, as in 123.489 million full-time jobs. Would that the Republicans were right!

Alas, they are not. Usually full-time is presently 117.688 million, 3.873 million above the January 2009 level when Obama took office, not 0.270 million above the January 2009 level. That's the nominal number. Doug Short at Advisor Perspectives could run the population-adjusted figures for us to show us just how far behind we really are in recovering to trendline at the Bush peak. Population has continued to grow causing employment-population ratios to plummet and labor participation rates to tank under truly dismal GDP conditions, so there is value in looking at it from that perspective. It's true. Obama is a total failure at job creation. When he turns his gaze to them, they seem to vaporize. Rush Limbaugh thinks this is on purpose.

Meanwhile the numbers continue to improve because this is a giant capitalist ship with tremendous inertia whose communist captain can't turn her on a dime for another go at the iceberg. He wishes we were China, but we aren't.

God bless the Republican House, but get off the number-of-angels-on-the-head-of-a-pin stuff. It's August, and we have gin to drink.

Obama Still The Worst For Unemployment: Above 7% For 56 Months Straight Since Elected

The average report of unemployment under Reagan was 7.58%, the absolute worst record in the post-war until Obama, who for the 57 months since his election in 2008 has had an average report of unemployment of 8.74%.

Rush Limbaugh Finds A GDP Conspiracy Where There Is None

When it comes to numbers, I have observed that Rush Limbaugh can be counted on to get something horribly wrong, and today was no exception. Today he has misrepresented the routine revision of the GDP data every five years as a revision of the numbers for only the last five years, as if it were designed specifically to make Obama look better. In actual fact, the revision of the numbers goes back not five years, but all the way back to 1929.

Truly incredible, and embarrassing in the extreme, since the truth is the revision occurs every five years, and this is the 14th revision in the series. This is why conservatives hope Rush retires soon, nevermind why liberals hope he retires. He's making us all look stupid when he carries on like this.

I have shown "five" in red below from today's Rush transcript so you can appreciate the thorough-going depth of Rush's misrepresentation of the facts: 

RUSH:  Here's what the Commerce Department is doing. 

They have "made changes to how it calculates gross domestic product," going back five years. "At the same time, the government also went back and revised data for the past five years, to reflect more complete as well as additional statistics from a variety of sources, such as the Internal Revenue Service and the US Department of Agriculture." They have made changes to how they're calculating the gross domestic product, or economic growth, and what they're doing now is they're going back five years. 

They have revised data for the past five years to, they say, "reflect a more complete, as well as additional statistics from a variety of sources, such as the IRS and the Department of Agriculture.  Why do you think they decided to go back the last five years to revise data?  To rewrite the horrible 4-1/2 years of Obama.  There's no question.  I don't know if it's fraudulent, but they're cooking the books -- and after cooking the books, after making it look as good as they can, it's 1.7% economic growth.

Here, however, is the statement from the BEA in today's official release about the routine revision every five years, which has been telegraphed to every reader of BEA GDP reports for many quarters running going back at least to last year (meaning Rush Limbaugh has never read even cursorily a single one of those GDP reports from the BEA in the interim, let alone today's):

Today, BEA released revised statistics of gross domestic product (GDP) and of other national income and product accounts (NIPAs) series from 1929 through the first quarter of 2013. Comprehensive revisions, which are carried out about every 5 years, are an important part of BEA's regular process for improving and modernizing its accounts to keep pace with the ever-changing U.S. economy.

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1.7% GDP in Q2 2013 is horrible enough, but the average report for the last three quarters comes in under 1%, 0.966% to be exact. So if there is some conspiracy to make things look better than they are, whoever's in charge of that ought to be fired, stat!

This country remains in deep trouble, and there is no conspiracy to hide it. 

George W. Bush Falls To Last For GDP Performance Using 14th Comprehensive Revisions

"I redefined the Republican Party"

The revised GDP figures going back decades came out today, and may be conveniently viewed here. Using these figures based on time frames which span January on January of presidential term, calculating percentage increase in GDP overall and dividing by the number of months in term to arrive at a factor, the rankings are as follows:

1) .533 JFK/LBJ [best performance]

2) .458 Truman (72 months, 1-1-1947 to 1-1-1953)

3) .357 Clinton

4) .323 Reagan

5) .300 Carter

6) .245 Nixon/Ford

7) .214 IKE

8) .180 Obama (51 months, 1-1-2009 to 4-1-2013) 

9) .173 George H. W. Bush

10) .142 George W. Bush [worst performance].

Don't forget that government spending is counted as GDP.  

First Report Of Q2 2013 GDP At 1.7%, Q1 Revised Down To 1.1% From 1.8%, Q4 2012 Down To 0.1% From 0.4%

The press release, excerpted below, from the BEA is here, the full pdf with the 14th revision of the comprehensive GDP data is here. The revisions lower in the prior two quarters combined with the low 1.7% first report in Q2 2013 should be extremely troubling to everyone. The economy is crawling.

"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.7 percent in the second quarter of 2013 (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP increased 1.1 percent (revised). The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3 and "Comparisons of Revisions to GDP" on page 18).  The "second" estimate for the second quarter, based on more complete data, will be released on August 29, 2013. The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and residential investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. The acceleration in real GDP in the second quarter primarily reflected upturns in nonresidential fixed investment and in exports, a smaller decrease in federal government spending, and an upturn in state and local government spending that were partly offset by an acceleration in imports and decelerations in private inventory investment and in PCE."

CNBC Falls In Love With Its GDP Jailer: Average Report Of GDP 0.966% Last 3 Quarters

The only thing GDP beat was poor expectations.

The average report of GDP in the last three quarters is now 0.966%, thanks to 1.7% in Q2 2013.

It feels good in its way when your killer stops stabbing you.

Moronic Shills For Obama At CNBC Call 1.7% GDP "Upbeat"

Only ignoramuses or liars would call GDP of 1.7% "upbeat", so take your pick. Charity demands the former, but I'm fresh out of it.

It is now four years to the day since Ben Bernanke pointed to the need for 2.5% GDP to reduce unemployment (here):

'Bernanke's core message was similar to that he delivered last week in congressional testimony: that the recession should end soon, but that considerable risks remain -- especially relating to the labor market. It takes GDP growth of about 2.5 percent to keep the jobless rate constant, Bernanke noted. But the Fed expects growth of only about 1 percent in the last six months of the year. "So that's not enough to bring down the unemployment rate," he said.'

The Bureau of Economic Analysis comprehensive revision of GDP and related measures going back decades, available here in pdf of 83 pages, now shows the last three quarters to be truly abysmal for this point in a so-called recovery: growth of 0.1%, 1.1% and 1.7% in the last three quarters. Obama's best year to date, 2012, now comes in at a measly 2.8%, far off the new post-war average of 3.4%.

There's nothing upbeat about any of it.