Monday, April 25, 2016

April Update: We are at the bottom ...

From mine of 3 March 2016:
We are at the bottom now, ready to go up.

Graph #4: DPD with Trend out to 2030
We're right there right now. DPD is ready to go up right now.

Remember: When the downtrend turns and an uptrend begins the economy for a while is very, very good. This is not going to be your typical anemic recovery. This is going to be the full tilt, rapid output growth, rapid productivity growth, high performance boom.

I can't promise you it'll last long, because the level of debt is already very high. But it'll be a good one while it lasts.

Cheese, I gotta make a better graph!


There are a few people who might see things as I do...

... and a few headlines that suggest such things...

... but for the most part, projections look like this month's New York Fed Staff Forecast: RGDP growth slowing from 2½% in 2014 to 2% in 2015, holding at 2% in 2016, and slowing to 1¾% in 2017. Sluggishness on top of sluggishness.

They predict no improvement. They are assuming that the existing state of affairs will continue indefinitely. Not me. I have specific reasons to expect a change: I have my Debt-per-Dollar graph. I predict strong growth to develop over the next three years, and to last perhaps five years.

// see also: A Pictorial History: Private and Public Debt


The Arthurian said...

This is all seat-of-the-pants stuff.
I'm not calculating estimates of the future.
I'm just reading a graph (like tea leaves).

Note that if we get the boom I expect, they'll be revising potential GDP up instead of down.

jim said...

Hi Art,

I am curious why you are thinking that the debt per dollar ratio will change direction in the near future?

The Arthurian said...

Hi Jim. I guess I would have to say because that's how the graph looks to me. It doesn't go down and stay down. It goes down, turns, and goes up again. And it is turning now.

It's a big deal because after the 1920 bottom and the 1945 bottom and the 1993 bottom, growth was vigorous for a while. So I expect vigor again this time.

jim said...

It looks like its going down to me.

Back about 5 years ago it looked like it was starting to turn and then it headed down faster than before.

The Arthurian said...

I could be wrong. We will see.

The Arthurian said...

Edward Harrison: Consumer credit: largest gain in 16 years and well ahead of expectations, 9 Jan 2018:

Economic data coming out of the United States continue to show a robust consumer-led expansion. The latest consumer credit report for November 2017 showed the largest monthly gain since November 2001, with outstanding consumer credit rising by $27.95 billion. Expectations were for $19 billion.
According to the Federal Reserve, revolving credit levels — which are mostly credit cards — increased $11.19 billion, a prodigious 13.3% annualized pace in November.

While non-revolving credit, comprised mostly of student and auto loans, rose by more — $16.8 billion — the pace of growth was slower, at 7.2% annualized.

Analysts see this not as reflective of distress but buoyancy as the Conference Board’s measure of consumer confidence hit a 17-year high in November. Nomura, for one, released a note saying: “This appears consistent with a strong labor market with low unemployment and elevated consumer confidence, which we expect will continue in the near term.”

Moreover, since consumer spending makes for almost 70 percent of the economy, these numbers bode well for economic growth figures to be released at the end of the month. The Atlanta Fed GDPNow tracker is at 2.7% right now, which is right about where private sector analysts see GDP coming in for Q4 2017.

And a reminder:

The dark cloud in all of this is the fact that this is debt-fuelled consumption.

Yes it is. And there will be hell to pay, later. But for a while things will be looking very good.

The Arthurian said...

From John C. Williams, President and CEO, Federal Reserve Bank of San Francisco
April 6, 2018

"The San Francisco Bay Area is a leading example of the growth we’re seeing across the country. Many of the things that drive us crazy—bad traffic, sky-high housing costs, and sidewalks and streets blocked by construction—are signs of a robust economy. It’s easy to blame the gridlock on 101 on all the techies flooding the Bay Area. But it’s not just tech that’s powering the American economy—far from it. This healthy expansion is taking place nationwide and across the full range of sectors. And it’s part of a global trend of stronger-than-expected growth."

Stronger than John C. Williams expected. Not yet as strong as I expect.