America’s comprehensive debt scorecard: Dangerous levels of debt in many important areas Note: Excerpts and links to articles below the bullets.
- Record U.S. Federal debt now over $17 trillion - Washington Times
- Record Federal Reserve debt is fast approaching $4 trillion – Wall Street Journal
- Record margin debt used to buy stocks over $400 billion - Wall Street Journal
- Consumer debt back with a vengeance now at $3.04 trillion - CNBC
- Federal student debt passes $1 trillion - Politico
- Total household debt is at $13 trillion nearly back to its pre-crisis level in 2007 - Federal Reserve PDF
- Social Security Benefits to Go up by 1.5 Percent; smallest adjustment since 1975 -- ABC News
- House Ways and Means Committee Republicans said 24 million people have received long-term unemployment benefits, compared with 8 million during and after the 1982 and 2002 recessions and 9 million after the 1991 recession. - Washington Times
- How 9 banks (mostly U.S.) are exposed to $200 trillion worth of derivatives - Business Insider
- Annual U.S. Health Care Spending Now at $2.7 Trillion - Fox News
Record Federal Debt now over $17 trillion
U.S. debt jumped more than $300 billion Thursday, the first day the federal government was able to borrow money under the deal President Obama and Congress sealed last week.
Debt now equals $17.075 trillion, according to figures posted online by the Treasury Department on Friday.
The $328 billion increase is an all-time record, shattering the previous high of $238 billion set two years ago.
The giant jump comes because the government was replenishing its stock of "extraordinary measures" — the federal funds it borrowed from over the past five months as it tried to avoid bumping into the debt ceiling.
Federal Reserve Balance Sheet Not Seen Returning to Normal Until at Least 2019
The Federal Reserve’s balance sheet, which is fast approaching $4 trillion in total assets, won’t return to normal until sometime between mid-2019 and mid-2021,according to new projections prepared by central bank researchers.
The research suggests the Fed could go as long as 6.5 years without generating enough income to make annual remittances of cash to the U.S. Treasury as it normally does, though that is in an extreme scenario that the researchers don’t envision.
The Fed’s holdings of Treasury and mortgage securities have soared since it began experimenting with bond buying programs during the 2008 financial crisis. Fed staff economists prepare simulations of how the Fed’s holdings and profits might evolve in the coming years.
In the baseline scenario prepared by the economists, the Fed would not sell its growing portfolio of mortgage and Treasury securities, and would instead let the portfolio gradually shrink as the bonds mature. Fed Chairman Ben Bernanke suggested that was the Fed’s preferred strategy at a press conference in June.
In this scenario, the Fed’s balance sheet would eventually shrink to a more normal level by August 2020, meaning the financial system would no longer be flooded with the trillions of dollars of excess cash that the Fed has pumped into banks.
In this scenario, the Fed would continue generating income and would in sum turn over $910 billion in profits to the Treasury between 2009 and 2025.
In other scenarios, however, the Fed could take a bigger hit. For instance, if interest rates rise two percentage points more than the Fed is expecting, to 6.9% on 10-year Treasury notes rather than 4.9% as expected, the Fed could go for a stretch without making enough money to make payments to the Treasury.
In one scenario, in which rates rise and the Fed sells mortgage bonds, the Fed would go more than six years without making payments. In such a scenario, which could be triggered by an inflation shock, the Fed’s balance sheet would get back to normal by 2019, but its overall income would be $100 billion less than in the baseline scenario.
The research was produced by Fed economists Seth Carpenter, Jane Ihrig, Elizabeth Klee, Daniel Quinn and Alexander Boote. It is an update of a paper produced earlier this year.
Federal student debt tops $1 trillion
Federal student loan debt has topped $1 trillion, the Consumer Financial Protection Bureau will announce Wednesday, a milestone that will only intensify the debate in Congress over what to do about student loan interest rates.
The interest rate on new, federally subsidized Stafford loans doubled on July 1 to 6.8 percent thanks to congressional inaction, and the two parties haven’t been able to agree to a solution to lower the rate.
The vast majority of new and outstanding student loans in the U.S. are backed and issued by the federal government, either via banks like Sallie Mae or, since 2010, directly through the Education Department. All student loan debt, which includes private loans from banks as well as the federal loans, now stands at $1.2 trillion.
Total outstanding student debt, when you add federal and private loans, passed $1 trillion near the end of 2011, according to the CFPB. When that number was made public in May 2012, it kicked off a wave of public concern about rising student debt levels. Now that federal loans alone have topped $1 trillion, it may accelerate discussions over what to do about interest rates.
Student loan debt already on the books won’t be affected by the interest rate increase — it will apply only to loans issued after July 1, but the eye-catching $1 trillion number is likely to be used as fodder by lawmakers and groups who argue that students are already taking on too much debt to attend college.
Private Debt: It's back with a vengeance, now over $3.04 trillion
CNBC - For CNBC, click here
Consumer credit, for instance, surged past the $3 trillion mark in the second quarter of 2013 and continues on an upward trajectory, according to the most recent numbers from the Federal Reserve.
- Consumer credit at $3.04 trillion, the total is up 22 percent over the past three years.
- Student loans are up a whopping 61 percent.
- Total household debt, according to the Fed's flow of funds report, is at $13 trillion, nearly back to its pre-crisis level in 2007 and a shade below government debt of $15 trillion.
- Through September, high-yield — or junk — bond issuance came in at $378.2 billion, a new record and a 27 percent surge for the same period in 2012, according to Dealogic.
- Top-quality, or investment-grade, debt has roared as well.
Though borrowing slowed in the third quarter as interest rates rose, September marked the sector's best month ever. Total investment-grade volume hit $148.1 billion — the highest month ever — thanks to Verizon's blockbuster $49 billion issuance on Sept. 11, marking the biggest single deal ever.
1. Globally, syndicated marketed loans — put together by multiple parties for a single borrower — hit $2.93 trillion in the first three quarters, a 15 percent annualized gain,with average deal size of $458 million the highest since 2007, Dealogic reported.
2. High-risk leveraged loans hit a global volume of $1.23 trillion, passing the trillion barrier for the first time since 2007.
Record margin debt
Investors borrowed a record amount against their brokerage accounts last month, as margin debt levels made the biggest monthly jump since January.
Last month, investors borrowed $401.2 billion against their portfolios, exceeding April’s record of $384.4 billion, according to the New York Stock Exchange. The Big Board’s member brokerage firms report the level of borrowing, known as margin debt, held against client accounts monthly.
Debt rose 4.8% in September from the previous month, the biggest single-month jump since January. Last month’s jump was larger than the corresponding rise in the S&P 500, which gained 3% despite tensions in Washington that led to the first partial U.S. government shutdown in 17 years this month. Margin debt last hit an all-time high in April, when investors borrowed $384.4 billion against their portfolios.
The last time margin debt made a big jump, Washington tensions were also in the background—but Congress had just reached a deal to avert the so-called “fiscal cliff,” sending the S&P 500 up 5% and margin debt up twice that amount. While September’s rise borrowing in was just about half the size, it came as the budget deadline loomed.
Rising levels of margin debt are generally seen as a measure of investor confidence, as investors are more willing to take out debt against investments when shares are rising and they have more value in their portfolios to borrow against.
But some see the increase as a sign of speculation, particularly if the borrowed money is reinvested in stocks. And some market-watchers have gotten wary that investors buying into stocks now are chasing a rally that has been mostly exhausted. The S&P 500 is up 22% so far this year.
“That is something to be concerned by,” said Sam Stovall, chief equity strategist at S&P Capital IQ. “If somebody is willing to borrow money to invest in stocks, they have a very high confidence level. And if everybody’s optimistic, who’s left to buy?”
Total household debt is at $13 trillion nearly back to its pre-crisis level in 2007
Social Security Benefits to Go up by 1.5 Percent; smallest adjustment since 1975
Social Security benefits will rise 1.5 percent in January, giving millions of retired and disabled workers an average raise of $19 a month to keep up with the cost of living.
The increase is among the smallest since automatic adjustments were adopted in 1975, and reflects the fact that consumer prices haven't gone up much in the past year. The annual cost-of-living adjustment, or COLA, is based on a government measure of inflation that was released Wednesday.
"Yea. Whoop-de-do," said Lance Colvin, a retired office worker in Kirkland, Wash. "That's my opinion."
Automatic COLAs were adopted in 1975 so that benefits for people on fixed incomes would keep pace with rising prices. Some advocates for older Americans, however, complain that the COLA sometimes falls short, especially for people with high medical costs.
Feds paid $252 billion in unemployment benefits during recession
The federal government has paid out 881 million weekly unemployment benefit checks during the current economic slowdown, totaling $252 billion since 2008, according to a new memo released Wednesday by the House Ways and Means Committee.
Committee Republicans said 24 million people have received long-term unemployment benefits, compared with 8 million during and after the 1982 and 2002 recessions and 9 million after the 1991 recession.
And the average recipient is out of a job for far longer, collecting 38 weeks of benefits, compared with a high of 17 weeks after the 1991 recession.
How 9 banks (mostly U.S.) are exposed to $200 trillion worth of derivatives
Demonocracy created a great infographic detailing the exposure of the nine banks with the largest exposure to derivatives. Combined, these nine banks are exposed to $228.72 trillion in derivatives, a shockingly high number.
That number, as Demonocracy states, is worth approximately three times the entire world economy.