timing is everything

American total debt level (government, business, mortgage, consumer) has hit an unprecedented level of 60 Trillion dollars. Well, $59.4 Trillion to be exact. A number so staggering that is truly impossible to comprehend. Yet, let’s give it a try. Here is what you can buy for 60 Trillion….

15 Trillion Big Macs at McDonald’s
60 Million McMansions at $1 Million each.
240,000 Boeing’s 777
Or you would have to spend about $2 Million per every single minute of your life if you are to live for 70 years.

It would only be appropriate if the stock market celebrates this amazing achievement with another stock market rally. On a more serious note, there is absolutely no way that the US Government or the US Citizens can repay this amount of debt. Given our current economic environment, it would have to be inflated away. That is precisely what my mathematical and timing work shows.

Even though there are signs of inflation, technically we are still in a deflationary environment. With more debt defaults and debt liquidation coming during the bear market of 2014-2017, deflation will continue to rule. Yet, come 2017 we should see ever increasing pressure on the inflationary front. Slow at first and accelerating into double digit inflation towards the 2030’s. That in itself will create a huge mess, but it’s too early to talk about that at this stage.

American Total Debt Level Reaches Unprecedented Benchmark Google

BusinessWeek Writes: Corporations Are Swimming in Cheap Cash. So Why Aren’t They Investing?

The difference is that back then, businesses were actually spending that cash they were able to borrow so cheaply, buying equipment and building factories and hiring workers. Today they’re just hoarding it. The pile of corporate cash on the balance sheets of nonfinancial companies has grown to $1.48 trillion, according to Moody’s. That’s an 81 percent increase since 2006. “Corporations are flush with cash coming off a huge profit cycle,” says David Rosenberg, Rosenberg points out that despite this abundance of cheap money, “we’re in the midst of one of the weakest investment cycles ever.”

Until Congress parts the clouds and gives businesses some bit of certainty as to spending and tax rates, let alone an assurance that the U.S. won’t default on its debt and the government won’t shut down, expect more of the same. Slow growth, weak demand, and more and more cash being piled onto corporate balance sheets.

Read The Rest Of The Article Here

The article claims that the lack of US fiscal clarity is the biggest culprit behind corporations not investing their huge cash piles and/or borrowing at cheap rates and investing it.

I respectfully disagree. First, the notion of huge stockpiles at corporate level are highly questionable at best. Now, in terms of borrowing and investing, the issue has nothing to do with US Fiscal clarity and everything to do with the fact that everything is significantly overpriced and there is technically nothing left to invest in.

What I mean is, due to a flood of readily available cheap capital over the last decade, most corporation have already heavily invested in and have streamlined the majority of their production capacity. When most of them look around today, there is literally very little for them left to do or invest in. This is the synopsis of the problems I have been talking about here this entire time.

Too much credit, overcapacity and slowing velocity of credit. Even though credit is readily available it will have even less impact on propping up our economy going forward. Just another falling vital sign of a dying patient.

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