The Bubble is Back… All thanks to credit
We have been chatting about a potential bubble in the conventional markets. This article focuses on the leverage that has taken over the market. Here are some interesting facts from a report on US credit market activity…
• Total (financial and non-financial) Credit jumped $484bn during Q1 to a record $59.399 TN, or 347% of GDP.
• Total Non-Financial Debt (NFD) expanded at a 5.0% rate.
• Corporate borrowings grew at a robust 9.3% pace
• Federal government debt mounted at a 7.1% rate
• Consumer credit rose at a 6.6% rate
• Household net worth surged $7.98 TN, or 10.8%, over the past year.
• Over the past four years, household holdings of financial assets have surged $22.0 TN, or 49%, to a record $67.2 TN.
don’t dispute the facts in the article, just some of the conclusions.
e.g. What is wrong with expansion of corporate debt if companies are sure they can earn more on the money borrowed than the cost of borrowing?
Debt need not be inherently wrong.
On the other hand, since Government and households tend not to use money to create wealth, that increase in debt I do believe is wrong.
Two really great points, Professor!
Meanwhile demand for gold is far higher in Switzerland than it is in China…
http://www.kitco.com/news/video/