BSJS - Weekly Commentary: Q4 2023 Z.1: Bubble Confirmation
2024-03-11 09:47:00 ET
Summary
- Q4 data confirm that government finance Bubble dynamics run unabated.
- Domestic Financial Sector borrowings recovered to SAAR $695 billion, after two straight quarters of contraction.
- The Household Balance Sheet is a key Bubble manifestation, a major factor behind resilient consumer spending. The Rest of World (ROW) balance sheet is also a key facet of Bubble analysis.
The Federal Reserve’s “Financial Accounts of the United States - Z.1” - where the rubber meets the road. Our quarterly read on systemic monetary (in)stability. Often concerning, but always refreshing: no Wall Street spin or BS – just 190 pages of data. And like booming securities markets and conspicuous speculative excess, Fed officials can ignore their own Credit and flows data at all our peril.
Q4 Non-Financial Debt (NFD) expanded at a seasonally adjusted and annualized rate (SAAR) of $3.500 TN, down marginally from Q3’s (SAAR) $3.874 TN – but up significantly from Q4 2022’s (SAAR) $2.244 TN. This put 2023 NFD growth at $3.625 TN, down only somewhat from 2022’s $3.785 TN. Notably, 2023 NFD growth was 46% higher than pre-pandemic 2019 ($2.472 TN) – the strongest Credit expansion since 2007’s record $2.530 TN.
At $73.808 TN, NFD has more than doubled (108%) since the end of 2008. NFD-to-GDP has inflated to 270%, up from 2007’s then record 233% - and the 191% to end the nineties. Since the end of 2007, Treasury Securities have inflated 324% - from $6.051 TN to $26.227 TN (to 94% of GDP from 41%). Total Treasury and Agency Securities ($38.187 TN) have inflated to 137% of GDP. Adding to “government finance Bubble” analysis, even after about 18 months of “quantitative tightening,” the Fed’s balance sheet ended 2023 $5.773 TN, or 607%, larger than Q4 2007.
Q4 data confirm that government finance Bubble dynamics run unabated. The SAAR $2.878 TN increase in Federal Government borrowings accounted for over 80% of the period's NFD increase. For the year, Federal borrowings increased $2.620 TN, up from 2022’s $1.547 TN, and the largest gain since 2020’s $4.581 TN.
Private-sector Credit growth slowed. Total Q4 Household Borrowings declined to SAAR $485 billion, down from Q3’s $622 billion and lower than Q4 ‘22’s $634 billion. Q4’s decline was despite Consumer Credit jumping to SAAR $166 billion from Q3’s $27 billion. Total Business borrowings slowed to SAAR $173 billion, from Q3’s $294 billion and Q4 ‘22’s $720 billion.
Domestic Financial Sector borrowings recovered to SAAR $695 billion, after two straight quarters of contraction....
Weekly Commentary: Q4 2023 Z.1: Bubble Confirmation