While per capita debt has ballooned from $1,640 in 1/66 to $53,000 today, it’s the growth rate that matters. Between 1/66 and 10/77 (11.75 years) the debt doubled. It doubled again by 7/84 (6.75 years), again by 10/90 (6.25 years), again by 7/05 (14.83 years) and again by 1/13 (7.5 years). The debt actually grew faster between 10/77 and 10/90 than today. Yet, we survived the debt-soaked 80s!
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Treasury Yields, Stay!
There seems to be widespread view that Treasury yields will rise sharply once QE2 is over since the captive market for bonds, the Federal Reserve, will be gone. Wrong, wrong, wrong! The only way Treasury yields will increase is if we have an accelerating economy (not), rising credit demands met by increases in bank lending (not) and heightened inflation risk (not).