Economic Statistics

USA Bank Non Performing Loans to Total Loans

Economic Stats



(Figures St Louis Federal Reserve)

USA Commercial Net Loan Charge Off

Economic Stats



(Figures St Louis Federal Reserve)

The charge-off fell yet the non performing are still high by historic standards.
http://www.nytimes.com/2013/03/31/opinion/sunday/sundown-in-america.html?pagewanted=1&ref=general&src=me&_r=1&

USA Federal Funds Rates

Economic Stats


(Figures St Louis Federal Reserve)

How much longer can America go on printing money?  USA is basically in a depression but we do not know it because there are so many forces at play (manipulated press stories, invisible growth) and one of the strongest is printing money.  Printing money is a necessary evil for now to prevent economic and social chaos.  We will have to contend with this monster in the future. But we cannot just brush it aside since we have never experienced the printing magnitude we have now created.

USA Number of Banks

Economic Stats


(Figures St Louis Federal Reserve)

Risk being shared by less banks.  As our banking world goes the way of the dinosaur an internet solution must emerge.  But who and when.  During times of great struggle comes great triumph and whatever comes out of this horrible economic situation will give birth to a new system that will last several hundred and not just 100 years.

GDP Real

Economic Stats


(Figures St Louis Federal Reserve)

M2 Velocity

Economic Stats


(Figures St Louis Federal Reserve)

GDP is producing less bang for the buck. It takes more turns of the printing press to produce positive GDP figures. Too many dollars chasing too few goods, econ 101.

 

The USA economy is breaking down and the old banking financial system cannot lead us to the new path that we must move towards.  The more pleasant term people use to describe the current state of malaise is de-leveraging.  Another way to look at this situation….the banks are fighting to hold onto share but their ways are archaic and not in trend with the new generation.  So as people move away from the banks the old guard is threatened and it is using whatever old weapons it has left to fight.  Dull swords cannot cut as thoroughly as a digital ax and the banks will lose.

De-leveragings occur within an Economic gearing system and we shift up or down accordingly to get the output we desire without tipping the scales either way. There are three ways to de-leverage:

1)  Fiscal Austerity

2)  Financial Restructuring

3)  Printing Money

We are doing all of the above since 2008 but the result has been a deathly hallow.  When will the old guard give up..never.

Steering this Titanic situation is a huge feat.  The economic gearing mechanism we have at play is shaky at best and with the right amount of gas and clutch we can hope to make these three work together and produce the soft landing that is desirable.  But it will be a bumpy road and we see that everyday with the news and markets constantly gyrating.

We are in 1934-38 period, in which there is positive growth around a slow-growth trend. The Fed will ease if the economy turns down again, to retire debt and put cold cash into people’s pockets.  The problem is after the Thirties came WW II.

Nominal interest rates must stay below the nominal growth rate in the economy, without printing so much money that they cause an inflation.   The way to do that is to be printing money at the same time there is austerity and debt restructuring going on.  This is an extremely hard task for any central bank manager to handle.

Europe is almost dead economically, except UK (still has a pulse at this time), and they have been following the USA PR game but I think it is game over soon.  Central banks will make monetary decisions for the country and a treasury will plan fiscal policy. Mistakes will occur along the way, but they can be adjusted.   The problem with the Euro group, and the UK saw this early on, is a lack of agreement amongst each member with risks, and there isn’t a decision-making process to produce agreements.  America knows how to bear risks better and its union is over 200 years old, the Euro is only 13 years old….a troubling age for any human.  So I feel despite Americas woes it may manage this situation better due to is cohesive and longer term period union but it will not be easy.  Euro will fall down but it will recover because humans do not give up – we learn from our mistakes and try again.

From now until the next economic statistic and the election the market will be bouncy and it is best to keep your money in safe havens e.g. Canada, Australia and similar.   There are some good stock pickings but now it is a matter of conserving cash and not trying to get that stock that will double or triple.  There are always stocks out their that can do that so avoid the temptation of the fast buck and hold onto what you have.

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