US Credit Growth – TCMDO Components – Chart of the Day
Here's your chart of the day: Credit Growth in the US by sector. We care about credit growth if we are politicians or the Fed because credit growth directly affects unemployment.
If credit shrinks, economy slows down, unemployment rises – and politicians get tossed out of office. And that would be bad. And after all, national policy right now really is only about the next two years.
The chart below is a bit busy and likely not what you are used to. Rather than showing absolute debt levels, it shows the change in debt over last year for each category. So since the circled blue line right now is about 800B, that means the total credit outstanding for the blue line category is 800B higher than it was at this same time last year. You can see that the black line (federal government) is now about 700B, which says the Federal Government has about 700B more in treasury bills outstanding than it did at the same time last year.
You can see the rest of the groups are clustered around 0, which says very little credit growth has occurred in those areas. For whatever reason, they don't want to borrow – or they can't borrow.
This year-over-year credit change chart is useful because you can see the historical credit growth patterns. For instance, in 2006 the "household" credit borrowers (orange-brown line) took out about 1.3 trillion in new loans that year. And they just started borrowing again this year after deleveraging (i.e. credit growth was below zero) for 5 straight years.
Point of the exercise – its all about government and the big companies.
Restaurants are filling up again, all is good. Meanwhile junk bonds hit an all-time low yield.