The Bubble Is Back [Dow Jones Industrial Average 2 Minute, Direxion Daily Small Cap Bear 3X Shares]

bubbleJohn Rubino: For all those analysts (including this one) who thought the debt binge of the previous decade marked end of the Age of Leverage, well, not so fast. It turns out that memories are short and government printing presses are powerful, and this combination has turned the “Great Deleveraging” into a minor speed bump on the road to something even more extreme. As the following chart illustrates, the growth in total US debt flattened in 2009 and 2010, with government borrowing more-or-less offsetting a decrease in consumer and business loans. But now the trend is once again onward and upward across the board.

US total debt 2014

Prudent Bear’s Doug Noland publishes a quarterly analysis of the Fed’s Z.1 report of US credit market activity. This is always a must-read, but last Friday’s was truly extraordinary. Among other big, ominous trends, Noland notes the following:

• Total (financial and non-financial) Credit jumped $484bn during Q1 to a record $59.399 TN, or 347% of GDP.

• Total Non-Financial Debt (NFD) expanded at a 5.0% rate.

• Corporate borrowings grew at a robust 9.3% pace

• Federal government debt mounted at a 7.1% rate

• Consumer credit rose at a 6.6% rate

• Household net worth surged $7.98 TN, or 10.8%, over the past year.

• Over the past four years, household holdings of financial assets have surged $22.0 TN, or 49%, to a record $67.2 TN.

What’s happening? The short answer is that zero interest rates have finally begun to work their magic. Corporations, for instance, are using the proceeds from low-rate bonds to buy back stock on a vast scale. See Zero Hedge’s Here’s the mystery and completely indiscriminate buyer of stocks in the First Quarter.

And now cheap credit is leading consumers to start buying cars and using plastic.

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