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Here Is The Credit Bubble

When in several years, experts will clamor that "nobody could have possibly seen it coming", we want to make sure that at least our readers "saw it coming" wide and clear from a mile away.

The chart below shows very clearly what is the next bubble, one which has nothing to do with such philosophical concepts as "what is money", or "net is not gross", and everything to do with a clear injection of debt with the sole intention of shifting consumer preferences and (mis)allocating capital.

Presenting the total loans owned by the Federal government as disclosed in the Fed's monthly G.19 statement on consumer credit - from $100 billion in 2008 this number is now almost $1 trillion.

 

Actually, one explanation: since credit is just a source of funds, there has to be a matched use of funds.

There is.

First, the bulk of US "government-held" has gone into auto loans, which as shown in the chart below, not only have surpassed total credit card (revolving) debt, but as of Sept. 30 just topped the credit card debt held by US consumer at the peak of the last bubble when housing was at all time highs, and consumers "charged it" like there was no tomorrow.

 

And then, of course, there is the student loan bubble.

 

And now you've "seen it coming."