Positioning For The Coming Rout

Thursday, May 12, 2011, 12:23 PM
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Positioning For The Coming Rout

Thursday, May 12, 2011

Executive Summary

  • What private and public debt levels are telling us
  • Housing's prospects for worsening the situation
  • Why endless compound growth is impossible
  • The crushing pain of a deflationary downdraft
  • Predictions and conclusions for the future

Part I - Why Growth Is Dead

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II - Positioning For The Coming Rout

Looking Deeper 

Okay, that's the big picture. It is why I am convinced that the next twenty years are going to be completely unlike the last twenty years. For starters, we're not going to be able to double credit this next decade, and that alone is a big shift with huge implications. But we're also going to be facing higher energy costs, which will further impair the smooth operation of the economic machine, because energy is an input cost to literally everything else. 

But to have an idea of what is going to happen next (say, over the next year) so that we can make better personal and investment decisions, it's important to dig a little deeper into the data. Here we want to lift the covers on total credit market debt and housing because these are the key elements of this story.

Total credit market debt is first broken into two main buckets: financial and non-financial sector debt. Financial sector debt belongs to commercial banks, savings institutions, credit unions, life insurance companies, brokers, dealers, and government-sponsored agencies. Non-financial sector debt belongs to households, businesses, and governments.

At this level we already see where some of the trouble lurks.


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