For the past several weeks I’ve been wondering to myself, “What portion of the economic growth we have experience in the past decade or so is solely attributable to the expansion of debt?” I have not been able to come up with an answer. However, I did create a chart that may or may not provide a vague, general answer.
For this chart I simply plotted the S&P monthly closes and the total consumer credit outstanding data (provided by the St. Louis Fed). My basic hypothesis is that the markets will find a bottom at their 1994-95 levels as this was the last point in time the markets started to increase after a period of zero or negative percent growth in consumer credit.
I am not an economist and I have no idea whether I’m right or wrong or just crazy. But I can look at a chart!
If anyone has an answer to the above question, please leave a comment.
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