The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Roses Are Red, Violets . . .

11/01/2017

Let’s see . . . GDP growth last quarter was unexpectedly high at 3%, unemployment is very low, stock market values are up . . . it is small wonder that the latest Consumer Confidence Index is the highest in almost seventeen years.  There is always another economic recession somewhere out there, but it is not visible on the horizon yet.

Watching for an economic recession is one thing, watching for a financial crisis is something different.  And, a financial crisis is much worse than a normal recession!

Those confident consumers have nearly stopped saving, down to 3.1% of income, which is down from 6% just two years ago.  The national debt continues to rise, credit card usage is up, and corporate bonds are being issued at a rapid rate (to lock-in low rates on money they may need in the future)  Total debt is rising.

Remember the Minsky Moment, named after the American economist, Hyman Minsky, who believes a debt balloon will continue to expand — until it pops, producing a financial crisis.  It is very premature to start worrying about a financial crisis, but it deserves more attention right now than the economic data deserves.

The decision by the Chicago Mercantile Exchange (CME) to begin a futures market in bitcoins worries me, and I will be watching it carefully.  You should too!

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