Credit Bubble Bulletin

Credit Bubble Bulletin2020-05-20T17:01:05-06:00

Presented by Doug Noland

Daily Commentary

Monday, June 21, 2021

[Yahoo/Bloomberg] Stocks Advance as Fed Jitters Ease; Asia Slumps: Markets Wrap

[Reuters] Stocks clamber up from 4-week lows, dollar eases from 10-week high

[CNBC] Japan’s Nikkei 225 plunges 4%, leading losses across major markets in Asia

[Yahoo/Bloomberg] Gold Gains as Biggest Weekly Loss in 15 Months Lures Investors

[Reuters] Oil prices firm on summer demand as Iran talks drag

[Reuters] Bitcoin tumbles 10% in wake of deepening China crackdown

[Yahoo/Bloomberg] U.S. Dollar Faces Volatile Week as Fed Policy Makers Line Up to Speak

[Reuters] Analysis: Fed’s “big tent” framework may fray under inflation surge

[Dow Jones] U.S. Economic Growth Picked Up in May — Chicago Fed

[Yahoo/Bloomberg] China Calls Top Banks to a Meeting to Reinforce Crypto Ban

[Reuters] China’s central bank urges tougher crackdown on cryptocurrencies

[Yahoo/Bloomberg] Evergrande Bounces After Four-Year Low, Squeezing Shorts

[Yahoo/Bloomberg] JPMorgan Warns of Possible Return of Year-End Funding Stress

[Bloomberg] U.S. 30-Year Yield Drops Below 2% For First Time Since February

[NYT] The Pandemic Stimulus Was Front-Loaded. That Could Mean a Bumpy Year.

[WSJ] What Investors Can Learn From the History of Inflation

[WSJ] Tight Labor Market Returns the Upper Hand to American Workers

[WSJ] Chip Shortages Are Starting to Hit Consumers. Higher Prices Are Likely.

[WSJ] Chinese Junk Bonds Flash Warning Signs

[WSJ] How Long Can America Keep Borrowing?

[FT] How meme lords fuelled a boom in the ‘stonk market’

[FT] Western powers reignite Beijing anger after G7 and Nato warnings

[FT] Belarus bonds tumble as EU considers ‘Venezuela-style’ sanctions

Weekly Commentary

June 11, 2021: Historic Monetary Inflation: Q1 2021 Z.1

Total Non-Financial Debt (NFD) expanded $879 billion during Q1 to a record $62.032 TN. NFD expanded an unprecedented $7.671 TN, or 14.1%, over the past five quarters. And with Financial Sector Debt increasing $236 billion and Foreign US borrowings gaining $95 billion, Total Debt increased $1.210 TN during the quarter to a record $84.7 TN. Total Debt expanded $9.199 TN, or 12.2%, over five quarters.

On a Seasonally Adjusted and Annualized (SAAR) basis, NFD expanded $3.521 TN during Q1. For perspective, annual NFD growth averaged $1.829 TN during the period 2009 through 2019. NFD surged $6.792 TN during 2020 and inflated $7.671 TN over five quarters. NFD as a percent of GDP slipped to 281% – yet compares to 227% at year-end 2007 and 184% to end the nineties.

Washington remains the insatiable debt glutton. Treasury Securities rose $342 billion during Q1 to a record $23.943 TN. While this was the weakest growth since Q2 2019, overall spending was supported by the Treasury’s significant draw down of its cash balance held at the Fed. The Federal Reserve Liability, “Due to Federal Government – Treasury Cash Holdings,” dropped $607 billion during the quarter (to $1.122 TN).

Over the past five quarters, outstanding Treasuries surged an incredible $4.924 TN, or almost 26%. In just 15 months, the ratio of Treasuries-to-GDP inflated from 87% to 109%. Treasury Securities-to-GDP ended the seventies at 57.8%, the eighties at 63.0%, and the nineties at 58.7%. This ratio had jumped to 76.1% to close out 2009 and 85.4% to conclude 2010. It’s now gone parabolic.

Q1 Federal Receipts were up 3% y-o-y to an annualized $3.866 TN. Meanwhile, Expenditures inflated 67% y-o-y to an annualized $8.171 TN. State & Local Receipts rose 11% y-o-y to an annualized $3.090 TN, while Expenditures increased 2% to annualized $3.053 TN.

The U.S. Department of the Treasury is not the only Washington institution ballooning its balance sheet. GSE (government-sponsored enterprises) Assets rose another $150 billion during the quarter to a record $7.879 TN. Over five quarters, GSE Assets inflated an unprecedented $749 billion, or 10.5%. Total Agency Securities (debt and MBS) rose $140 billion during Q1 to a record $10.226 TN, with three-year growth of $1.354 TN (15%). (more…)

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