As a fun little exercise, we concocted the following charts. What we do in each of the following is start with a base year of 1970. From there we chain link the annual growth rate of the Dow Jones and what we believe are two relevant aggregate sector views of total debt - total non financial sector debt and total financial sector debt. Remember, we view non financial and financial sector debt independently, not from an additive or double counting perspective. Now clearly, debt is not supporting the stock market solely.
Debt underpins real estate values, consumption, capital equipment purchase, business expansion, etc.
Nonetheless, we believe it's a fun little exercise in perspectives. A veritable mushroom cloud that has not stopped expanding as of yet. Greenspan could only hope that productivity would be this kind of a consistent grower over time. This chart is testimony to the fact that lending and debt creation is big business in today's new economy. Hence the bull and bear argument over what is considered excessive leverage in the modern marketplace.