Contraction in Bank Credit Worse This Time Around
A recent Bloomberg article was titled Pandit “Near Death” Hoard Signals Lower Bank Profits, and stated that Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) were hoarding cash as if another crisis were on the way. Also, a Wall Street Journal article entitled Jittery Companies Stash Cash showed that cash on the balance sheets of S&P 500 companies was the highest in 40 years.
The chart below, courtesy of economist David Rosenberg of Gluskin Sheff & Associates, shows that credit is still contracting as banks go through the painful process of repairing their balance sheets. As indicated, bank lending has now declined for 21 weeks in a row and over this entire time frame, a total of $216 billion (15% at an annual rate) of loans and leases have vanished.
Rosenberg said:
The contraction in bank credit is broad based across all lines of business -- consumer, real estate and companies -- and seems to be motivated by both the bank and the borrower. This is a dead-weight drag on aggregate demand and it goes to show that the real story in Q3 was not that it was so wonderful that real GDP expanded at a 3.5% annual rate but that the number was so low in view of the massive dose of government stimulus and that the contraction in credit is ongoing and acting as a tourniquet on private sector spending activity.
Meanwhile, the US Depository Institutions Aggregate Excess Reserves continue their ascent at levels far in excess of the amount banks need to keep on deposit to meet their reserve requirements (see chart below). The level indicates that the balance sheets of banks remain under pressure, especially in view of the fact that the value of some assets isn't known. A definite peak in the Excess Reserves graph should coincide with a turning point for banks getting back into the business of making loans. 
Rosenberg concluded:
This is 1992-93 all over again when the commercial banks used the steep yield curve as an opportunity to reliquify their balance sheets, and the flip side of that process was a listless and jobless recovery. The only difference is that the credit contraction process this time around will prove to be even more pernicious and enduring than it was back then, and inevitably drag Treasury note yields back down towards the lows we saw almost a year ago.
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Those assets are more like anchors around the necks of the banks. They are doing their best to tranfer the anchor to the neck of the taxpayer/consumer, who used to be known as Citizens.
Someone is going to sink, it's just a question of who it will be.
520.0000 new jobless claims which is less then last week and that is good news?
On a percentage basis of those left working its higher then Februarys report when they had 725.000 new first time claims. With fewer and fewer people working we could possibly get the numbers down to 50.000 or less and eventually its just gets to the point where the last man out can shut off the lights.
Each week for the last ten months we have had over 500.000 which leaves roughly 20 million out of work who can claim benefits. Millions more who are self employed are either out of business or barely hanging on. Millions more are part timers barely making enough to survive on. Millions more are simply not in the loop at all as they have long ago given up on finding work.
Productivity is up 9%? With 30 million folks no longer working the productivity would naturally go up by the process of mathematics by division.
With 7000 folks a day losing the last of their extended benefits it's like having 210.000 new first time totally unemployed a month where the last of their lifeline is yanked out from under them and now they have nothing to survive on. The second leg of unemployment is where the hurt really begins for millions of Americans.
I hope Wall Street and our financial system enjoy their loot and year end bonus. While millions of American choke on their chunk of coal the thieves of Wall Street and our banking system live it up large on the spoils of thieving ways.
Hollyhoppedupfeffenjehossafat.
Johnny Lunch Box
JPM
Insider Trading Arrest today gives some hope that some oversight and regulatory agencies are finely getting off their arse and breaking away from their Porn to fill their obligations to their pay checks.
Now that the economy has your attention how about going back to the Naked Short selling which swiped trillions of dollars from investors last year? Naked short selling has always been illegal and short selling in itself even though it is legal is still wrong. Short Selling makes casinos out of the markets. The intent of the markets was to finance business and provide capital. Let's get the RICO laws back to work and prosecute the naked short selling and bring back those illegal gains to the investors who got wiped out by this illegal activity.
Good God! Let's hope these naked short sellers are not too big to fail or worse yet too big to prosecute.
Johnny Lunch Box
JPM
The unemployed can simply buy a house, flip it and keep $8,000, why are they complaining? If they have a real estate license, as 1% of Californians did at the RE peak, they can collect a commission too.
The self-employed can just write themselves a bad, post-dated check.
If anyone is wondering what all the bloody golden feathers floating about are, they are from the Golden Goose, slaughtered by a greedy Elite.
Who don't want their taxes increased to pay for their crimes.
http://www.tradingstocks.net/ html/inflation_deflation_credit_bub.html
The problem is that this has to keep expanding exponentially to be able to sustain the GDP growth. That cannot happen indefinately. But it is politically incorrect for the government to let GDP fall. So they step in and they borrow and spend instead of the private sector. But that is hardly a fix. All of the will be paid back either with higher tax or with printed money in the future. In either case, the real wealth we have is going to go away. Current standard of life cannot be sustained by borrowing. Consumer economy is a myth. When you hear consumer is keeping the economy up and running means we are spending borrowed money. Only producers prosper. Consumer who is not a producer will become poorer and poorer.
