Where are we with Peak Credit?

In this 2013 post I provided the chart below from the federal reserve's "FRED" website which showed that credit growth was in a 5th and final wave.







In the chart above I clearly indicated that wave 5 had not peaked yet because it was not yet at the height of wave 1, shown by the red "I beams" in the chart.  Using this model, the rough estimate for the peak should be 3,400ish.  At the time of that reading, the credit was at about 3,100.

Today's chart update below is just wave 5 of the above chart.  This is important in order to get the wave detail.  It clearly shows that consumer credit is still climbing.  Of course, you can't pick absolute numbers for EW analysis. The wave structure is far more important.  Also, there are many measures for credit and consumer credit is possibly not the earliest one to show the downturn.  Don't be surprised that nobody knows the real truth about all of this!  All you have to do is look at the above chart, note that it has been in the current trend all the way back to Bretton Woods and understand that we are rapidly approaching uncharted territory.  The federal reserve has been sailing in uncharted waters for years.  Sooner or later they will strike a coral head and, as someone who has done that in person in the Bahamas, I can tell you it is not a pretty sight.

In any case here is one possible wave count:

Another count is also possible which leaves less, if any, runway until credit collapse begins:

I don't know which is a better count because the resolution of the data is so coarse.  Some quick blips down and then back up could easily have gotten filtered out.  This is why high resolution data always produced a count whose odds of being correct are higher.   Since we don't know how this will affect the stock market, it doesn't even make too much sense to assign too much immediate importance to it.  In other words if your goal is to make money shorting the markets into the collapse of the debt Ponzi, will the markets be forward looking in that regard or will the credit have to collapse first?  I just don't know and I don't think anyone else does either.  So the main take-away here is simply that this debt Ponzi can begin to reverse at any time and when it does it will not likely be a small blip but rather a major credit event for the global economy.

As Patrick Swayze said in the movie "Next of Kin", "You ain't seen bad yet, but it's coming".