Net Credit Market Debt Contraction In Two Sectors Is Repressing GDP

The domestic financial sector continues net negative in credit market debt outstanding, $3.27 trillion below the October 1, 2008 peak, as of October 2012.

And the household mortgage sector continues net negative in credit market debt outstanding, $1.22 trillion below the January 1, 2008 peak, as of October 2012.

These broken sectors for credit expansion have been large, important channels through which trillions in "money" has historically been created in the economy but no longer is, destroying GDP growth in the process. Until these channels are repaired, or replaced, total credit market debt outstanding will not double every 6-11.5 years as it has since the Second World War, and GDP will not recover to its historic 20th century levels.

TCMDO last doubled between 1999-2007

The level at which total credit market debt owed last doubled starting from 1949 was $49.8 trillion in July 2007. Five years later, in July 2012, the level was only $55.7 trillion when arguably it should have been already $74 trillion.

Something has gone horribly wrong with credit expansion in the United States, and the financial and housing sectors remain ground zero for the problem.

For When "Incompetent" Just Doesn't Convey How You Feel

(see them all, here)

Vanguard Prime Money Market Fund 3yr Return: 0.05% Annually

That figure is not inflation-adjusted, which if it were would mean sizeable negative returns.

Meanwhile the S&P500 Index for the 13 years since 2000, adjusted for inflation, is up 0.05% annually:

Stocks Have Barely Beaten The Lowly Money Markets From The March 2000 Highs

For the full thirteen year period since March 2000 (when the S&P500 reached the last of six annual new high watermarks going back to 1995) to March 2013 (when the index had firmly revisited the 1500 level) stocks have barely beaten the performance of the lowly money markets.

Had you invested $10,000 in, say, the Vanguard S&P500 Index Fund, VFINX, you would have reaped an extra $3,900.02 (39%).

But the same amount invested in Vanguard's Prime Money Market Fund, VMMXX, would have netted you $3,370.96 (33.7%).

Charts from Morningstar using Vanguard data:

Cyclically-Adjusted p/e Above 20 Forecasts Near-Zero 10yr Returns

As discussed here by Mark Hulbert:

Where does the CAPE stand today?

It currently is at 23.3, which is 41% higher than its historical average. While the CAPE’s current level is not as high as the 40+ readings that were registered at the top of the internet bubble, it does not bode well for the next ten years. On average over the last century, the S&P 500 has produced a 10-year inflation-adjusted return of close to zero whenever the CAPE has been above 20.

To be sure, note carefully that this is a 10-year forecast. Even if it turns out to be accurate, it doesn’t mean the market will decline in a straight line between now and 2023. It wouldn’t be inconsistent with this forecast for the market’s impressive recent rally to continue for a while longer, for example.

politicalcalculations.blogspot.com

Hulbert is right. On March 1, 2000 the Shiller p/e stood at 43.22. For the thirteen years from March 2000 to March 2013, your return in the S&P500, adjusted for inflation and with all dividends re-invested, as been exactly +0.05% per annum.

Sort of like investing in a money market fund right now.

Ouch.

By the way, the Shiller p/e this morning stands at 24.14.

GLD is down to 1062 metric tons yesterday

So says Reuters, here:

"Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell a further 0.3 percent to 1,062.30 tonnes or 34.15 million ounces on Monday - the lowest since August 2009."

Barack Obama: The Social-Democratic Philistine Who Embraces The State . . .

"WE GOT YOUR MONEY!"

. . . and fears the people.

Barack Obama, disappointment to true believers everywhere, here at Ohio State University, May 5, 2013:

"Unfortunately, you've grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity that's at the root of all our problems. Some of these same voices also do their best to gum up the works. They'll warn that tyranny [is] always lurking just around the corner. You should reject these voices. Because what they suggest is that our brave, and creative, and unique experiment in self-rule is somehow just a sham with which we can't be trusted."

Friedrich Engels, March 18, 1891, here:

"And people think they have taken quite an extraordinary bold step forward when they have rid themselves of belief in hereditary monarchy and swear by the democratic republic. In reality, however, the state is nothing but a machine for the oppression of one class by another, and indeed in the democratic republic no less than in the monarchy; and at best an evil inherited by the proletariat after its victorious struggle for class supremacy, whose worst sides the proletariat . . . cannot avoid having to lop off at the earliest possible moment, until such time as a new generation, reared in new and free social conditions, will be able to throw the entire lumber of the state on the scrap-heap. Of late, the Social-Democratic philistine has once more been filled with wholesome terror at the words: Dictatorship of the Proletariat."

Aren't Keynesianism and Homosexuality Equally Forms Of Psychological Rebellion?

"Despite his Cambridge education, aristocratic manner and wealth, Keynes was also an outsider in his own way. He was an aesthete who enjoyed describing himself as an 'immoralist,' a leading member of that sparkling circle of British intellectuals known as the Bloomsbury group that defied Victorian mores in both art and love. Keynes was married but was also homosexual, a fact that automatically put him in defiance of social convention.

"Keynes's rebellion against economic orthodoxy, as he explained himself, was not derived from the political discontents of socialism and class conflict. It was based on a psychological insight: capitalism was ripe for unprecedented abundance, universally distributed, if only human society could get beyond the stern dogma of the Protestant ethic, the Calvinist ethos that insisted self-denial and suffering were good and necessary for the human spirit. Save for the future, the Calvinist creed taught, and you will be rewarded in the long run and certainly in heaven. 'In the long run,' Keynes observed, 'we are all dead.' Enjoy the here and now, he insisted. Pleasure is good. Suffering is mostly unnecessary."

-- William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Touchstone, 1989), p. 318.

Funniest Chart Ever From The St. Louis Federal Reserve

Someone had a fat finger on the "zero" when updating the not-seasonally-adjusted full-time jobs data for this chart on Friday morning.

The result: 66.48 billion full time jobs in the US in December 1969!

Alas, our country has fallen from a great height indeed.

Mish Is Wrong About Full Time Employment Being Down. It's Up.

seasonally-adjusted full-time, 2007 peak to now

Mish is wrong about full time employment being down. It's up.

Here's Mish:

"Voluntary plus involuntary part-time employment rose by a whopping 441,000 jobs. Take away part-time jobs and there is not all that much to brag about. Indeed, full-time employment fell once again, this month by 148,000."

In the seasonally-adjusted category, full-time is up 150,000 in April from March. In the not-seasonally-adjusted category, full-time is up 878,000 between March and April! Usually-part-time is flirting with its highs again but is not yet at a new high above the March 2010 level of 28.106 million.

That said, what really counts is that despite some improvement in the figures, the fact is full-time employment remains either 7.5 million off the 2007 peak in not-seasonally-adjusted terms, or 5.8 million off the peak in seasonally-adjusted terms. But part-time is not yet meaningfully above its peak levels to be able to say ObamaCare is part-timing the country at the expense of full-time jobs. The trend up in full-time has been in fits and starts and has been wholly inadequate, but it is up since 2010.

  

April Unemployment Drops To 7.5%, Full-Time Job Gains Ominously Slowing

The full unemployment report in pdf from the Bureau of Labor Statistics is here.

The official number of unemployed is unchanged from March at 11.7 million, while other broad categories are little changed from a month ago.

Part-time for economic reasons was back up almost 280,000 to 7.9 million while the average work week in April declined by 0.2 hours to 34.4 hours, a sign that part-timing may be an emerging trend as ObamaCare rules begin to percolate through the economy.

Job additions were relatively strong in April at 165,000 and a significant upward revision to March helped keep the prior twelve month average jobs gained figure to 169,000, unchanged from the last report.

Gains in full-time, year over year, took a huge jump in this month's report in the not-seasonally-adjusted category compared to last month's report when 880,000 full-time jobs were added from March 2012 to March 2013 (about 73,333 per month). For April 2012 to April 2013 the figure soars to 1,675,000 full-time jobs added year over year (about 139,583 per month).

As it turns out, that only looks like a big number compared to the last fifteen months of year-over-year full-time job additions, not-seasonally-adjusted:

April 2013/April 2012 = 1.675 million

March/March = 0.880 million

Feb/Feb = 1.604 million

Jan/Jan = 1.989 million

Dec/Dec = 2.029 million

Nov/Nov = 2.377 million

Oct/Oct = 2.589 million

Sept/Sept = 2.698 million

Aug/Aug = 1.928 million

Jul/Jul = 2.372 million

Jun/Jun = 2.769 million

May/May = 2.016 million

April/April = 2.155 million

March/March = 2.730 million

Feb/Feb = 1.856 million

Jan/Jan = 1.506 million.

In other words, for the current year 2013 to date the average report of full-time job gains year-over-year has been just 1.537 million January to April, down over 25% from the same period last year when the average was 2.062 million, and down nearly 32% from 2012's average report of 2.252 million full-time job gains year-over-year.

Whatever happy talk may be happening out there, the fact of the matter is that the pace of full-time job gains has definitely slowed to a significant degree while full-time employment remains over 6% off the July 2007 peak of 123.2 million.

Bad news.

ObamaCare Has Its Own Hitchhiker's Guide To The Galaxy Moment

ABCNews reports the following here:

The Kaiser Family Foundation released results of a non-partisan study today finding more than 40 percent did not even know the law was in place.

“Four in ten Americans (42%) are unaware that the ACA [Affordable Care Act] is still the law of the land,” the report says, “including 12 percent who believe the law has been repealed by Congress, 7 percent who believe it has been overturned by the Supreme Court and 23 percent who say they don’t know enough to say what the status of the law is.”

Bloomberg: Incompetent Cops Skipped Street Where Wounded Tsarnaev Hid In Boat

Here:

Sue Lund lives about five blocks from where police engaged in a wild shootout April 19 with the two Boston Marathon bombing suspects and about eight doors down from where the one who escaped alive was found 18 hours later.

Yet, during the all-day manhunt, she said police never searched her Franklin Street home or garden shed in Watertown, Massachusetts. Ten other neighbors had the same story and said they didn’t know of any homes that had been searched on Franklin, where Dzhokhar Tsarnaev was discovered by someone on the street about 30 minutes after an area lockdown was lifted. ...

How did hundreds of police who descended on the town fail to find a 19-year-old, who was unarmed and shot, lying under a tarp on a boat in the backyard of a house about 400 yards (366 meters) from where he had abandoned a car after fleeing the scene of the firefight? ...

Initial reports described the gunfire and grenade explosions as a firefight with a desperate fugitive. In fact, it was a one-sided shootout. Investigators didn’t recover a weapon from the boat, according to two federal law enforcement officials who asked not to be identified in discussing an active criminal probe.

Real Federal Spending Growth Since 2000 Has Outstripped Real GDP 3 To 1

Your government in action

People who keep saying government should spend more to grow the economy more don't want to confront the fact that despite the growth in real federal outlays between fiscal 2000 and fiscal 2012, real GDP growth has lagged far behind by a ratio of 2.77 to 1.

Federal outlays in fiscal 2000 (in 2005 dollars) were $2.0406 trillion, and $3.2125 trillion in 2012, according to the Tax Policy Center, here. That's an increase in real spending of 57.4% over the period.

Contrast that with real GDP. On October 1, 2000 real GDP stood at $11.325 trillion. Twelve years later it was only $13.6654 trillion, an increase in real GDP of only 20.7% over the same years.

If federal spending counts just as much as private spending for GDP, it's not self-evident from these numbers that the higher rate of spending is doing anything to boost real GDP. Quite the opposite.

A more prudent way to look at would be to say that maybe all those federal expenditures in excess of the 20.7% of real economic growth were wasted, even destroyed, and that in fiscal 2012 real federal spending should have been $750 billion less than it was.

Meanwhile the bureaucrats scream bloody murder over a lousy $85 billion across the board spending cut for 2013.

Cutting off a drunk is never pretty.

On the other hand, he probably won't remember who last put a foot in his ass, either.

Housing, Shmousing. Here's What's Really Been Happening.

RC Whalen, here, in January:

"[J]udicial states remain mired in foreclosure backlogs that still stretch ahead for years to come.  Because Barack Obama and Tim Geithner refused to restructure the truly sick parts of the US housing sector (and the zombie banks with these exposures), only sectors where speculative capital can be deployed quickly and easily are showing signs of life.  You don’t see private equity firms buying homes in Scarsdale, NY, or Greenwich, CT, now do you?  Even ignoring the horrible effects of SS Sandy, was NJ housing really recovering?"  

Mish Finally Calls This Economy Fascism

Took him long enough, here:

"In short, the problems we face are not the result of free market capitalism, but rather the results of Fed sponsored corporate and military fascism."

The instrumentality through which fascism is expressed in the United States today is the banking system reorganized in 1913 under the Federal Reserve. The brakes put on it with the Glass-Steagall Act in 1933 after it cracked-up the first time after only twenty years were released in 1999 with the passage of the Gramm-Leach-Bliley Act.

It took only nine years to crack up the second time.

Number One Insult Which Made Tamerlan Tsarnaev Angry

"Your mother just wears a suicide vest because she's flat."

Imagine A World Without Balloons? How About One Without Idiots?

Another remove-all-doubt moment from the irrepressible Rep. Hank Johnson of Georgia, here, on "helium", one of America's "real concerns".

We Need All The Global Warming We Can Get: An Ice Age Is Coming

So WUWT here:

"[T]here have been 5 interglacial events in the last 500,000 years. At ~10,500 years our current cooler but benign Holocene interglacial is coming towards its end and the reversion of our planet to a real ice age is foreseeable."

Big Deal: Debt To GDP Ratio Comes In At 105%

The debt as of 4/24/13 was $16.7943 trillion. GDP in the latest report was $16.0102 trillion. So the one divided by the other yields 1.05, or 105%. To which I say, Big deal.

In other words, the current annualized national income no longer is sufficient to cover what we owe. But there is no situation in which anyone stops consuming and simply works for a year to pay off everything one owes. At this you'd last maybe 40 days if you were Jesus Christ, but trust me, you aren't Jesus Christ. This is not the way to look at it. Instead, we should look at the debt like a mortgage.

Interest payments on this ever-growing debt in fiscal 2012 came to $360 billion, implying an interest rate paid of a little more than 2%. This rate is artificial. It is the result of manipulation afforded to us by the Federal Reserve's deliberate policy we affectionately call ZIRP, zero interest rate policy, which pushes long term interest rates down into the cellar. A more realistic rate would be double that, 4%, about a half point higher than current averages for 30-year mortgages (call it an extra penalty for having less than AAA status if you want). So, if one were to treat the total public debt outstanding like a mortgage amortized over 30 years at 4% fixed, our "mortgage" payment to pay off the debt would be $80.304 billion monthly, or about $964 billion a year. And you'd have to stop deficit spending.

In the current spending environment, $964 billion annually is about 25% of current government outlays of $3.8 trillion. Current government receipts, however, have lagged the outlays by about $1 trillion annually, so the "mortgage" payment would be closer to 35% of income.

Responsible persons all over this country pay off mortgages with that percentage of income devoted to debt service, and they do it all the time. It's high time the federal government started acting like them. In order to do so, however, current spending apart from the "mortgage" payment would have to be cut $1.96 trillion annually, or 48%, to $1.84 trillion annually for all programs. (That squealing you hear is the sound of stuck pigs).

Somebody get on this right away.