Weekly Commentary: 'Real Economy Sphere Vs. Financial Sphere' Q1 2025 Z.1

2025-06-16 06:00:00 ET

Marines deployed to Los Angeles. A U.S. Senator wrestled to the ground and handcuffed. Israel executing a surprise decapitation attack on Iran’s military leadership and nuclear capabilities, with retaliatory missile launches forcing citizens across Israel into emergency shelters. One more unnerving week with that ominous feeling things could spiral out of control. A tense weekend awaits, with new war developments, a Washington military parade, and millions of protestors spread across the country.

Not as conspicuous, but finance is beset with its own precariousness. During the mortgage finance Bubble period, I occasionally referenced a long-term chart of total system Credit. Total Credit was expanding exponentially, in the most vertical rise since the “Roaring Twenties.” Most economists and analysts have issues with total system Credit, arguing that it double counts actual debt levels. System Credit, after all, combines non-financial and financial debt, with financial debt basically comprising borrowings within the financial sector to hold debt originated in the real economy (i.e., government, household, and corporate)....

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