Before we go on, let's look at the biggest possible macroeconomic measures of two key factors: Money and Debt.
MONEY SUPPLY - Since 1960
Long term, going up. Trend was broken for a few years in the 1990s, when the government was running surpluses. Recent years, going up fast.
They dropped M3 - which adds a variety of timed deposits - in 2006, supposedly because it was inaccurate. This sent Paulians into a fit of claims that the Fed doesn't like how high it's getting. Shadow Stats (John Williams) at
http://www.shadowstats.com/charts/monet ... ney-supply estimates it as having peaked over 14 trillion last year and for now dropped to about 14 trillion. That would put M3 money supply at around equal to GDP, which is a historic high.
US M3 as a percentage of GDP, historic
MONEY SUPPLY - Recent Quartershttp://www.federalreserve.gov/releases/h6/Current/See there for their definitions of M1 and M2. You will note that money supply has continued to grow from year to year.
M1 with Currency & Demand Deposit components
See that crazy short spike in late 2001 - in reaction to 9/11. Then it returned to trend, but look at how crazy thick the red line got - this represents a lot of day-to-day volatility.
MONEY BASE
This is, basically, the Federal Reserve's balance sheet - the total it lends out to the banks. It's the base from which the rest of credit money is created by the fractional reserve system. After many many years to reach $800bn, they more than doubled it quasi overnight in September-Nov 2008, to more than $2100bn. The fractional reserve system has yet to unfold this into the full credit it could become (hence all the complaints that banks have money, but aren't lending it).
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DEBT
Puts the public sector debts in perspective, don't it now?
To create this chart, someone helpfully plugged in the numbers from the table at Federal Reserve, "Flow of Funds Accounts of the United States," Release Z.1, March 2010: Table D3, "Debt Outstanding by Sector" (1978-2009). The full report is at
http://www.federalreserve.gov/releases/ ... ent/z1.pdf.
Using numbers from that chart, I see that starting in 1978, debt for all domestic non-financial sectors (household, business and public) tripled during the first decade, then almost doubled and doubled again in the two that followed, from 3,211 billion in 1978 to 34,702 billion in 2009, or a growth factor of almost 11. Mortgage debt grew by a factor of 14 (708 to 10,484), federal debt by a factor of 12.5 (621 to 7805). Federal debt in 2009 reached about 55% of GDP (after a 1.5 trillion deficit last year thanks to the bailouts and economic decline) but that's also nearly four times current annual Federal income (i.e., what they take in as revenues through taxes).
GDP unadjusted for inflation (nominal dollars, or what was actually in the books at each stage) went up from 2,417 billion in 1978 to 14,453 billion in 2009 (both Q4), or a growth factor of about 6.
Nominal-dollar GDP numbers from
http://www.data360.org/dataset.aspx?Data_Set_Id=352Thus the debt burden of non-financial sectors has nearly doubled relative to GDP.
By the way, after adding up the numbers for net borrowing in the same years (Fed Res Z.1 Table F.1), it seems that cumulatively the debt figures are very close to the total principle in credit extended, i.e. what was actually borrowed without the accumulated interest (which means that debtors, cumulatively, have tended to keep up with interest payments). However, I can't figure out what of the original principle has been paid off, and what out of the current debt outstanding represents interest. This matters because principle (credit extended) is created money, paid off principle is retired as money, and interest is added extra to debt without actual creation. But I guess the outstanding principle must be something like 90% of the money actually still in supply.Now look at the chart again and note the blue piece - that's the debt of domestic financial sectors, most of which is what banks owe to banks or other financial entities, much of which is the fabled leverage. From 412 bn in 1978 that rose to 17,083 bn in 2008, or growth by a factor of 41. Then came the crash, and deleveraging, meaning a lot of banks paying off what they owed to banks (with more than a little help from you), resulting in a drop to 15,651 bn in 2009, or still a growth since 1978 by a factor of THIRTY-EIGHT, or 3.5 times more than the growth factor for the non-financial sectors. Relative to GDP, the financial sector debt outstanding has gone up from about 20 percent of GDP in 1978 to more than 110 percent.
That figure is a measure of the runaway growth in financial speculation independent of real production since the dawn of the neoliberal era with its removal of capital controls and banking regulations. Total financial sector debt is higher than the GDP and almost double the Federal debt. This is the big useless monster weighing down on the rest, and if it can't find profitable outlet before continued develeraging, it will cause a renewed crash.
As to who holds the grand total of FIFTY TRILLION DOLLARS IN ALL SECTOR DEBT (2009): Fed Res Z.1, Table L.1 establishes that 75 percent of that is owed to the US financial sector, with the rest split 60/40 between households and rest of world.
About 8 trillion or more of that is supposedly in the hands of the top 6 banks.
Anyway, I felt like injecting some "real" numbers here. (Given that the Fed may be playing, relies on other statistical agencies and banks that may be playing, and anyway XX percent of the economy is underground, unaccounted, hidden or offshored.)
What I think they mean in terms of "inflation" and "deflation" can wait for another post, especially since a) these slippery terms need to be defined, and several of the definitions refer to real phenomena that are important whether or not they should be called inflation/deflation; and b) I change my mind regularly and often feel I have no clue.
Suffice to say it seems not everyone here is distinguishing between money, nominal asset values vs. prices, assets as opposed to income, different types of assets (nominal vs. real vs. cash), debt as opposed to liabilities, money circulation as opposed to supply, etc.
