Or select individually:
- Banks Continue To Pull The Rug Out From Under The Economy
- Bankers Getting Paid A Lot To Sit On Their Hands And Do Jack Squat
- History Shows Why Another Sovereign Debt Crisis Is Right Around The Corner
- The Unemployment Chart You’ll Love And Hate
- Yep, The Great Money Bubble Has Come To Its End
Can the economy revive if banks don't start to lend again?
Let's hope so.
Today the St. Louis Fed released its latest monthly look at commercial and industrial loans at major banks -- a measure that some would say represents the essence of the US banking system.
As you can see, this measure is still falling like a knife -- a bad sign for the ongoing health of the economy. (And also not what we were promised when we bailed out the banks.)
Yesterday we pointed you to the latest data from the St. Louis Fed showing that bank lending continues to plunge.
Rather than ply businesses with loans, banks are instead opting to hoard cash and buy Treasuries.
And yet despite the lending shutdown, bonuses are back up, per fresh data out today from the New York Comptroller.
In other words, sitting on your hands and doing nothing is a pretty lucrative gig.
This chart from Gerard Minack at Morgan Stanley, inspired by the research of Harvard professor Ken Rogoff, shows how, surprisingly, sovereign debt crises are pretty common from a historical perspective.
The developed world has gone through many cycles of debt accumulation followed by sharp and sudden corrections of debt imbalances via sovereign debt crises of some form as shown below. The blue line indicates the percentage of nations either in default or restructuring their debt each year. You can see that individual national crises tend to clump together and happen in waves. The last wave was around 1990, while the 2000's were characterised by a lull in overt sovereign debt problems.
Which means that a new wave of sovereign debt defaults could be just around the corner and would be perfectly normal historically speaking; since as Morgan Stanley said in their recent related report, 'this time will probably not be different.'
Here's an unemployment chart you'll both love and hate, from Citi's Steven Wieting.
As shown below, since 1980, employment (in red) has fallen after corporate profits (in black) have risen, and vice versa. The relationship is very clear.
Problem is, there's about a one-year lag between the two trends. This highlights what should simply make sense -- companies hire people once they see profits rebounding, and more importantly once they believe that adding more people will lead to higher profits. Still, this fact of economics isn't fun for the unemployed.
But here's the good news. Given the recent rebound in corporate profits the U.S. has already experienced, there is a very high chance that employment will get better over the coming twelve months. One can't stress enough the fact that employment is a lagging indicator:
It's constantly argued that the one reason the stock market recovered so swiftly from last year's decline was the rapid expansion of the money supply, courtesy of The Fed.
That may be, but soon that reason will no longer be valid.
The latest measure of M2, which is one of the ways the Fed measures the total supply of money out there, shows convincingly that the great expansion has peaked. Actually it's not just peaked, it's cresting in a way that's unprecedented on the chart.