by John Rubino, Dollar Collapse:
Self-destruction usually happens in stages. At first there’s a binge in which the thrill outweighs the sense of transgression. This is usually followed by remorse, acknowledgement of risks, and an attempt to reform.
But straight-and-narrow is exhausting, and because of this is frequently just temporary, eventually giving way to a kind of capitulation in which the addict drops even the pretense of self-control.
2018 is apparently the year in which the world enters this final stage of its addiction to debt. Wherever you look, leverage is soaring as governments, corporations and individuals just give up and embrace the idea that borrowing is no longer a necessary evil, but simply necessary. Some recent examples:
(Reuters) – China’s banks extended a record 2.9 trillion yuan ($458.3 billion) in new yuan loans in January, blowing past expectations and nearly five times the previous month as policymakers aim to sustain solid economic growth while reining in debt risks.
Net new loans surpassed the previous record of 2.51 trillion yuan in January 2016, which is likely to support growth not only in China but may underpin liquidity globally as major Western central banks begin to withdraw stimulus.
Corporate loans surged to 1.78 trillion yuan from 243.2 billion yuan in December, while household loans rose to 901.6 billion yuan in January from 329.4 billion yuan in December, according to Reuters calculations based on the central bank data.
Outstanding yuan loans grew 13.2 percent in January from a year earlier, also faster than an expected 12.5 percent rise and compared with an increase of 12.7 percent in December.
(CNBC) – Total household debt rose by $193 billion to an all-time high of $13.15 trillion at year-end 2017 from the previous quarter, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data report released Tuesday.
Mortgage debt balances rose the most in the December quarter rising by $139 billion to $8.88 trillion from the previous quarter. Credit card debt had the second largest increase of $26 billion to a total of $834 billion.
(Chicago Tribune) – President Donald Trump unveiled a $4.4 trillion budget plan Monday that envisions steep cuts to America’s social safety net but mounting spending on the military, formally retreating from last year’s promises to balance the federal budget.
The president’s spending outline for the first time acknowledges that the Republican tax overhaul passed last year would add billions to the deficit and not “pay for itself” as Trump and his Republican allies asserted.
Trump’s plan sees a 2019 deficit of $984 billion, though White House Budget Director Mick Mulvaney admits $1.2 trillion is more plausible after last week’s congressional budget pact and $90 billion worth of disaster aid is tacked on. That would be more than double the 2019 deficit the administration promised last year.
So far, the financial markets are responding pretty much according to script:
(CNBC) – U.S. government debt yields hit session highs Wednesday after the government reported inflation in January rose more than expected.
The yield on the benchmark 10-year Treasury note jumped to 2.882 percent as of 10:03 a.m. ET. It hit a four-year high of 2.902 percent on Monday. The yield on the 30-year bond was last seen higher at 3.146 percent. Bond yields move inversely to their prices.
Schwab’s Kathy Jones argued that the latest reading could mean that the yield on the benchmark 10-year note could test 3 percent in the next few months.
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