Odograph.com

There is just too much money out there:

Over the last 30 years, the value of financial assets — such as stocks, bonds and bank deposits — grew to be four times larger than annual global gross domestic product. Key factors: personal savings rates rose in Asian economies, companies piled up profits year after year and Middle Eastern oil-exporting countries grew wealthier.

Mckinsey Global Institute estimates this measure of wealth peaked at $194 trillion in 2007. And while it fell back to $178 trillion at the end of last year, it is still dramatically larger than the $43 trillion in 1990 or the $94 trillion in 2000.

From Another Bubble Sooner Than You Think?

A good article at Interfluidity helps make sense of the asymmetrical inflation we’ve seen in recent years:

Whether an economy generates asset price inflation or consumer price inflation depends on the details of to whom cash flows. In particular, cash flows to the relatively wealthy lead to asset price inflation, while cash-flows to the relatively poor lead to consumer price inflation.

From the OC Register Mortgage Insider:

First American CoreLogic reports that 35% of mortgage holders in the Orange-Los Angeles area had zero or negative equity (paper profit), in their homes at the end of June.

but

Another interesting [stat]: 21.9% of owners who live in their home in Orange County have no mortgage at all, according to the U.S. Census Bureau estimate for 2005 to 2007. Here’s a table showing owner-occupied homes with and without mortgages in OC, CA and USA

That 1 in 5 houses are safe and owned actually seems kind of high, given the loan and borrowing frenzy. So for every 10 houses 2 will be owned, and 2-3 will be underwater?

I’ve been watching the charge-off story build. It is the rate at which lenders give up on borrowers, and take them off their books. With all the bad loans offered in the boom (credit card, education, auto), the risk has been high.

I didn’t realize it had gotten this bad (WSJ):

The 2008-2009 recession hasn’t been anywhere near as deep as the Great Depression in most measures. We already knew trade was looking worse this time around, and now Moody’s points to another metric: loan charge offs.

The ratings agency notes that U.S. banks has incurred $45 billion of loan charge-offs collectively in the third quarter and $116 billion in the year to date. “Charge-offs year-to-date imply an annualized rate of 2.9%. For the third quarter, they translate into an annualized rate of approximately 3.4%. By both these measures, the current pace of charge-offs exceeds the early years of the Great Depression, as illustrated in the chart below. Annual charge-offs hit 2.25% in 1932 before peaking at 3.4% in 1934,” Moody’s said.

A very disturbing graph (via Calculated Risk and Macroblog):

There is a thing called structural unemployment, and I’m not sure it is being sufficiently discussed.

I visited a couple of the Peak Oil sites recently. They seemed to be down in the dumps because they didn’t get “their” crisis. They got a financial crisis, rather than short term oil-driven doom. Now they are discussing whether they should switch to long term doom as their focus.

The problem with that, of course, is that the longer the term the less the certainty … about anything.

Peak Oil will be a multi-decadal story. Oil will become more rare and expensive over 20, 30 years (or more), and solutions will be sought over that same span. It’s kind of hard to make a rational prediction about what will be invented and what society will accept 20 years from now … but people do.

We still have the blithe optimists and the irrational pessimists.