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U.S. Debt

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It is interesting to monitor how the public and private debt curves are trending.

Since the crisis of 2008, total credit market debt as a % of GDP has been going down for the first time since history. Private debt was in a debt deleveraging mode (blue graph), while the Federal Reserve’s public debt was in a debt expansion mode (red graph).

If we look at the nominal value of debt, we can see that since 2014, total, private and public debt are all growing again, resuming exponential expansion.

Percentage of U.S. Government Public Debt held by Foreigners

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This page is created to monitor the Percentage of U.S. Government Public Debt held by Foreigners.

The debt held by foreigners can be found here.
From the chart we can conclude that an ever increasing amount of the U.S. Government Public Debt is financed by foreigners. As long as the chart keeps increasing, U.S. bonds are in demand by foreigners. Once this chart starts to decline, it means that confidence of foreigners in U.S. debt is starting to wane.
The following chart gets updated weekly, so this is the most important chart to monitor.

Public Sector Credit Expansion Vs. Private Sector Credit Contraction

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In 2009, Marc Faber said these words at one of his famous seminars: 

“But for the fiscal stimulus to even have a small chance of succeeding at reviving economic activity it has to be larger than the private sector credit contraction.”

In today’s world we have 2 opposing forces, one is Ben Bernanke’s public sector credit expansion (Chart 1) and the other is private sector credit contraction (Chart 2). If credit grows, all is well, but when they cancel each other out and credit contracts, a recession will start. To make it easy I took the credit growth chart for the money creation of banks (Chart 1). For the private sector I took the household debt chart (Chart 2).
Bank credit is going up due to money printing:
Chart 1: Bank Credit
Private sector debt is declining due to repayment of debt. I indicated that the savings rate has gone up to 6% now, so I expect more repayments in the future.
Chart 2: Private Sector Credit
If we then add these two charts together we get Chart 3 and the picture isn’t pretty. The percentage change in credit has gone negative and is at a historic low. As you can see, each recession (grey bar) is accompanied by a dropping credit and 2008 is by far the worst one. If we don’t see a rising trend here, you can expect ugly times ahead.
Chart 3: Credit Expansion/Contraction