Your daily dose of optimism

To contrast the gloom & doom from most other market commentary & news, here is your daily dose of optimism.

Let’s start with the Senior Loan Officer Survey:


Banks are reporting that, for the first time since 2005, they are seeing stronger demand for consumer loans.


Job openings are once again at their best post-recession level, now the highest in 3 years.


Household liabilities are poised to go flat year-over-year.  This is potentially huge.

A little background:  up until 2000, consumption and household liabilities increased nearly dollar for dollar:


This relationship broke down after the dot-com collapse:


This was the result of the housing bubble — the prices of houses went up dramatically, people went deeper into debt for them, but didn’t spend commensurate to the increase.  Since spending = someone else’s income, this was unsustainable, of course, and led to a rash of household deleveraging.

This household deleveraging put a $1.255 trillion dollar downward pressure on the US economy in 2009.  It put another $712B downward pressure in 2010.  It has accounted for just under an average of $200B per quarter (annualised 5.7% of GDP) of downward pressure in the past 12 months.  If this is about to go even flat, this is a tremendous pressure relieved from not just the US economy – but the global economy.

This possibility is completely unaccounted for in prices.

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2 Responses to Your daily dose of optimism

  1. TC says:

    Blog more! fantastic stuff – just fantastic thinking and observations. I am passing it along to MMT trader too.

  2. Ellie K says:

    I only hope you are correct, Matt. This is the second time I’ve dropped by to scan your Federal Reserve FRED charts during the past week, as I needed a double dose of optimism. The global economy, U.S. included, could benefit so very much from a respite from the burden of de-leveraged household values.@EllieAsksWhy

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