Debt is surging in the U.S.
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Hoisington Quarterly Review and Outlook, Q1 2017
By Lacy Hunt and Van Hoisington
Excerpts:
Debt. Total domestic nonfinancial debt, excluding off balance sheet liabilities such as leases and unfunded pension liabilities, surged to a record 254.8% of GDP in 2016, 5.6% greater than in 2009 when Lehman Brothers failed (Chart 2). Total debt, which includes domestic nonfinancial, foreign and bank debt, amounted to 372.5% of GDP in 2016, compared with 251.9% of GDP in 2006, the final year of previous tightening cycle, which, in turn, was greater than in any earlier time from 1870 through 2006.
First, in the initial quarter of 2017, the year-over-year change in the monetary base was -4.8%. This comes after sharp contractions in each of the previous four quarters, the largest such decreases since the end of World War II (Chart 3). Some argue that this unprecedented weakness in the monetary base is not relevant since the depository institutions still hold $2.1 trillion of excess reserves (defined as the difference between total reserves and required reserves). The textbook writers emphasize that excess reserves are the key to money and credit expansion. But, the multiple expansion of bank reserves so diligently explained in the textbooks was written for a regulatory environment that no longer exists, which is the second different condition.
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America is drowning in debt.
There is one dynamic solution: Grant U.S. citizens the same access to liquidity that was provided to Wall Street’s financial sector during 2008-2010 – to help them unwind their debt profiles and return to ‘financial stability.’
It is time to unwind debt at ground level – and pump up America’s Monetary Base.
It is time to restore economic liberty for American families and set them on course for long-term ‘financial health.’
The Leviticus 25 Plan 2018 – $75,000 per U.S. citizen