Weekly Commentary: Q2 '25 Z.1

2025-09-15 11:45:00 ET

Once a quarter, Bubble Analysis requires the deciphering of a bevy of new Fed data. It’s been quite a ride; quarter-to-quarter epic monetary inflation. Outstanding Treasury securities were about $3.3 TN when I started my quarterly Z.1 analyses in 1999. It closed June at $28.5 TN. Agency Securities has more than tripled to $12.4 TN. Total Non-Financial Debt (NFD) inflated from $18 TN to $78 TN. Total (Debt and Equities) Securities have ballooned from $34 TN to $163 TN. Household Net Worth inflated from $40 TN to $176 TN.

Money Market Fund Assets (MMFA) ended 1999 at $1.6 TN and finished this June at $7.5 TN. System Repo Assets have ballooned from $1.7 TN to $7.8 TN. Bank Deposits inflated from $4.5 TN to $21.3 TN – Banking system Assets $7.5 TN to $28.6 TN. Broker/Dealers Assets have tripled to $6.0 TN. Rest of World (ROW) holdings of U.S. financial assets have ballooned from $7 TN to $60 TN.

Last quarter’s Z.1 CBB highlighted “Real Economy Sphere vs. Financial Sphere” analysis. The overheated financial sectors posted another quarter of booming growth. Overall NFD growth slowed to a seasonally adjusted and annualized (SAAR) $2.324 TN, down from Q1’s SAAR $2.681 TN and Q2 2024’s $2.783 TN. System Credit growth was held back by a temporary drop in federal borrowings (SAAR $471bn vs. $1.057 TN). At SAAR $1.257 TN, growth in financial sector borrowings was down somewhat Q/Q, but remains quite elevated (2023 $346bn and 2024 $575bn). The highly levered Banks and Broker/Dealers further expanded hefty securities portfolios....

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