The latest flow of funds report shows more private sector de-leveraging. The risk of deflation remains well intact. The dreaded balance sheet recession is not over yet:
“Household debt contracted at an annual rate of 2½ percent in the first quarter, the seventh consecutive quarter of decline. Home mortgage debt fell at an annual rate of 3¾ percent, a significantly faster decline than in the fourth quarter, while consumer credit contracted at an annual rate of 1½ percent.
Nonfinancial business debt was flat in the first quarter, after four consecutive quarters of contraction. Bank loans and commercial mortgages continued to decline, while corporate bonds and commercial paper expanded.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.