Monthly Archives: March 2013

This Chart Of Bitcoins Looks A Lot Like An Average Bubble

I love reading about bubbles. It’s the psychological aspect of it that I like the most. Greed and human beings.

The price of Bitcoins has gone parabolic in the last few days. The price went up 152% this month alone! The value of all Bitcoins outstanding is now $ 1 billion.

Some say that the way the Cyprus bailout handles depositors and the capital controls forced on savers is the cause for this rise in the last month.

Too much people are flocking into Bitcoins out of fear for another Cyprus style bailout and it is starting to make the Bitcoins chart look like an average bubble. Compare these two charts.

Bitcoin price in USD at Mt.Gox:

Bitcoins mt gox

How an average bubble forms:

average bubble chart

My take is that we are pretty much near the end of the parabolic rise. But ofcourse these things can continue longer than most can imagine..

Total US Credit Market Debt As A Percentage Of GDP Is Declining

Too much debt was one of the main causes for the credit crisis in 2008. So I have been trying to figure out if the total debt-to-GDP ratio has been declining the last few years.

Total US credit market debt-to-GDP has indeed been declining from 385% in 2008 to 355% in December 2012.

Update (November 2013): Right now the ratio seems to be around 345%

us total credit market debt to gdp long term liabilities

In dollars total credit market debt has still been going higher, mainly fueled by the government spending, while household debt has been declining.

total credit market debt total household debt st louis fed

US Government debt.

US government total debt

We are moving in the right direction. To much household debt is bad for an economy because people who have run up to much debt will stop spending. Their debt needs to go down so they will have more money to spend on goods and services instead of on interest.

This long term chart which also shows total US credit market debt as a percentage of GDP for the great depression shows that we are following the same pattern as in the great depression.

total us credit market debt to GDP long term great depression

We are going to a more sustainable ratio. Only we are going a bit slower than in the ’30’s but that is maybe a good thing if we want to prevent a lot of civil unrest and the rise of fascist political movements as happened in the ’30’s .

Japan’s Huge Debt

Japan is the country in the world with the highest government debt to GDP ratio. There is a lot of talk lately about Japan going under because of it’s enormous debtload and the inflation-generating policies of Prime Minister Abe. So I decided to check the numbers out from the Japanese Ministry of Finance.

Report found here [PDF]

Japan’s total debt will be at 750 trillion yen at the end of 2013.

Japan total debt

Japan will be for 46% (42 trillion yen) dependable on the issue of new government bonds for its budget this year. Half of the money raised with the issue of new bonds (22 trillion yen) will go to the national debt service. The national debt service includes the repayment of previous government bonds and the interest on those bonds.

Japans government bonds debt service percentage of budget

Japan projects to pay 10 trillion yen in interest this year on their outstanding bonds. That is roughly 11% of the total Japanese government budget.

Japan paid interest on japan government bonds

These are some pretty interesting statistics in my opinion. Because the Japanese government has to pay a very low interest rate on their bonds it all works out at the moment. One can only imagine what will happen when these rates will go up. Taxes will probably have to go up in the future to pay for all this debt.

Japan will certainly be a market to follow in the future!

AEX Index Since Inception With And Without Dividends

Below is a chart courtesy of @beursanalist showing the AEX index since its inception in 1983 with and without dividends.

The AEX started on January 3 1983 with a starting price of € 45. As I write this blogpost the AEX index is at 350,74.

Aex Index including dividends

This chart shows how important compounding (the re-investment of your dividends) really is over a long term.

The return without compounding is roughly 677% over 30 years while the return with compounding is roughly 1900%.

Now I only need to get my hands on an AEX-inflation-adjusted chart.