Charts

This is a page of various economic indicators that I like to keep an eye on.  All of these charts are updated continuously.

 

Oil and Natural Gas Prices

Oil (Brent Crude) is the green line with $/bbl on the left y-axis.  Natural gas (Henry Hub) is the red line with $/MMBTU on the right y-axis.

FRED Graph

 

Oil Priced in Gold

When we price oil in gold (ounces of gold needed to buy a barrel of oil) as opposed to pricing it in dollars (# of dollars needed to buy a barrel of oil), we see that oil is quite expensive right now in gold terms, despite being cheap in dollar terms:

Oil Priced in Gold

Oil Priced in Gold

 

Oil Price Dollar Impacts

Much of the changes in the global oil price is due to the US Dollar strengthening and weakening. Because oil is priced in US Dollars (the petrodollar), when the US dollar strengthens, oil gets cheaper to other countries. When the US dollar weakens, oil gets more expensive for other countries. When we chart this effect we see that the price of oil (blue line) is largely influenced by the impact of value changes in the US Dollar (red line). Once you remove the impact of the US Dollar, you see that oil prices are on a steady upward trajectory since 2005 (green line).

US Dollar Impact on Oil Prices

US Dollar Impact on Oil Prices

 

Oil Price Change

While the overall price of oil is important, the change in the price of oil is perhaps a better leading indicator of future economic growth.  Economies can adapt over time to slowly rising oil prices, but large jumps in oil prices shock the economy and can lead to recessions.  In fact, 10 of the last 11 recessions in the United States were preceded by an oil price spike.  So watch out if the blue line rises above 20-30%:

FRED Graph

 

 Natural Gas Energy Discount to Crude Oil

Each barrel of oil has about 5.8 million BTUs worth of energy in it.  Oil is priced in barrels while natural gas is priced in million BTUs.  If we compare the price per unit of energy for oil to the price per unit of energy for natural gas, we see that they began diverging in 2005.  This is telling us that oil is becoming more expensive on a relative energy basis.  If the blue line on this chart keeps rising, oil is becoming more expensive.

FRED Graph

 

Treasury Yield Spread

The treasury yield spread is the difference in yield (potential future annualized return) between the 1-year treasury bond and the 10-year treasury bond. This is one of the most important leading indicators of the health of the US economy. When the yields converge or invert, the economy usually slows. Historically, during times of a large treasury yield spread, you want to be “risk on” and during times or converging or inverted yields, you want to be “risk off.” So watch out if the blue line crosses the red line:

Here is another way to look at the chart treasury yield spread.  When the blue line (the spread between the 1-year and 10-year bond yields) approaches zero or becomes negative, the red line (the stock market) usually goes negative in the following year.

FRED Graph

 

 Velocity of Money

One of the biggest untold stories over the past decade has been the falling velocity of money.  Velocity of money is the speed at which money changes hands.  If you and I have a 2-person economy with $10 total between us, and I pay you $10 to mow my lawn and you take that $10 and pay it back to me to shovel your sidewalk, then our combined economic velocity of money for the year is 2. If the velocity of money is rising, it means people are spending their money more quickly and that the economy is experiencing inflation. If the velocity of money is falling, it means people are hoarding their money and the economy is experiencing deflation. If Since July of 1997 the velocity of M2 money supply has been falling precipitously. The velocity of money is now at its lowest level in recorded history. If the velocity of money starts moving back up towards its historical average, we could see massive inflation.  This is something to watch:

Velocity of Money

Velocity of Money

 

Gold Price

The price of gold is a good indicator of inflation. When gold rises, inflation or inflation expectations are rising.

Gold Price

Gold Price

 

Global Money Supply

Here is the current chart of global money supply for the four largest currencies (US, Euro, Japan & China) converted to US Dollars.  As you can see the central banks around the world have been printing money at an exponential rate for the past decade.  On a local scale, such money printing almost always leads to severe inflation.  On a global scale, it remains to be seen what will happen.

Global Money Supply of US, Euro and China in Trillions of US Dollars

Global Money Supply of US, Euro and China in Trillions of US Dollars

 

US Total Debt Level

This chart shows all of the debt in the US economy, including federal bills and bonds, consumer debt (credit card debt, mortgages and car loans) and student debt. It appears to be growing at an exponential rate, heading towards infinity. As we know from nature, exponential growth is never sustainable.

Total US Debt Level

 

Consumer Debt Per Privately-Employed Citizen

Consumer debt (credit card debt) per privately-employed citizen peaked in Q4 2009. Since then, American households have been deleveraging.

Consumer Debt Per Privately-Employed Citizen

Consumer Debt Per Privately-Employed Citizen

 

Federal Debt Per Privately-Employed Citizen

Because consumers are deleveraging, the government continues to leverage up to prevent the economy from crashing into a deflationary spiral. The US now has a federal debt of over $150,000 per privately-employed citizen.

Debt Per Privately-Employed Citizen

 

Actual Interest Rate on Federal Debt

The reason the federal debt is a big problem is that the current low borrowing rates cannot be sustained forever. The current interest rate that the US government pays on its debt is the lowest in recorded history:

Actual interest rate paid by the US government on debt

 

Current Monthly Interest Cost on Federal Debt Per Privately-Employed Citizen

Because the interest rate is at historic all-time lows, the amount of interest paid per privately-employed citizen is relatively flat despite the exponentially increasing debt levels. It currently only costs us about $300 per privately-employed person per month to pay the interest on our debt.

Interest payments paid on US debt per month (in $) per privately-employed US citizen

 

Future Monthly Interest Paid on Federal Debt Per Privately-Employed US Citizen if Rates Return to 1980’s Highs

The real worry is that if interest rates increase back to the 1980’s highs, the amount of interest on debt owed per privately-employed citizen would be over $2000 per month! Considering the average person pays a little over $1200 per month in rent, we simply wouldn’t be able to afford to pay the interest on our government debt.

Monthly Interest on US Debt Per Privately-Employed Citizen if Rates Return to 1980’s Highs

 

Private Employment to Population Ratio

This chart shows the percentage of Americans who hold a non-government job. I believe this is a better measure than traditional employment ratios that include government employees in the numerator and only include working-age non-military population in the denominator. Based on this chart, we see that private employment in the US peaked in September 2000 and has been declining since.

Private Employment to Population Ratio

 

Full Time Employment to Population Ratio 

Another way of measuring employment. By this metric, US employment peaked in April 2000.

Full-Time Employment to Population Ratio

 

Real Median Household Income

Worse still – while employment has been falling, so too have average wages. Fewer people are working and they’re making less money. Real median household income peaked in 1999.

Real Median Household Income

 

Capital Flows by Asset Class

This chart shows the flow of money into and out of various asset classes.  These are calculated relative to the total combined money supply of the US, Eurozone and China.  The green line is US equities.  The pink line is US real estate.  The black line is US treasuries.  The gold line is gold.

Money Flows by Asset Class

 

S&P 500 Relative to Total US Debt

This chart shows the S&P 500 relative to the total US Debt level. While the stock market may go up in nominal terms, if it falls relative to the total debt level, it isn’t actually increasing.

 

Capex Spend Change

The change in capex spend is a great leading indicator of the economy’s health. If companies increase capex spend, they are becoming more optimistic about the future. If companies cut capex spend, it means they are becoming more pessimistic about the future. When the year-over-year capital goods spend falls below 0, a recession usually follows.

FRED Graph

 

World GDP Growth Forecast

This map shows the IMF forecast for world GDP growth in the next year. Bubble color indicates growth rate while bubble size indicates the economy’s relative size:

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