Fed Z1: Blah
Courtesy of Karl Denninger at The Market Ticker
Well, there’s nothing here that indicates any sort of real change. Let’s start with the grand-daddy chart:
The arrow is approximately where the outstanding credit in the system began to decline. Note that the slope of each sub-component hasn’t done much in terms of change in this last report.
Has there been ANY improvement? Let’s zoom in:
Well, not really.
Households and non-profits contracted their outstanding credit by $60 billion in non-mortgage instruments and a sizable $99 billion in mortgages. Non-financial business credit expanded very slightly (about $30 billion in the quarter) as did state and local governments ($25 billion.) Interestingly enough it appears that farm credit decreased while non-farm increased – I will do some more digging in that area, as it may be a leading indicator of distress in the farm space – particularly family farms. The Federal Government increased its debt by a net $361.5 billion (!) while financial instrument credit decreased awhopping $638.5 billion. Rounding out the numbers is the rest of the world (exposure in the US), which was up a modest $28.6 billion, continuing a trend that has run since the end of 2008.
All-in all, nothing to see here. Anyone who claims that "activity in credit is increasing" has to explain how, when consumers and non-financial businesses continue to de-lever and financial instruments are literally being shunned like a leper colony – the contraction this quarter ran at a seventeen percent annualized rate while the actual annual rate of change over the last 12 months is only 13.5%. In other words, the deleveraging is accelerating, not stabilizing, among financial instruments.
As for the "de-levering" of the consumer, that’s still to come. Outstanding credit has contracted a mere 2.7% since this mess began with credit peaking in the second quarter of 2008, or about 1.5% annualized. Mortgages have delevered only 3.7% from the top in the first quarter of 08 in total, or about 1.9% annualized.
The short form here folks is that all the "prop jobs" have been intended to do one thing and one thing only – protect the banks from having to recognize their bad loans.
To believe that consumers and non-profits could have only de-levered at a rate of less than 2% annualized including all the bad mortgage debt that is out there, and is now "recovering", is not only ludicrous but is utterly unsupported by the data, which is not showing the alleged "growth."
What has been and is clearly happening is that this bad paper is not being recognized as bad and written down – that is, people are lying. This in turn means we have both zombie consumers who cannot spend (as they’re incapable of getting more credit while they’re in arrears) and zombie banks who are incapable of lending as they’re well-aware that they are sitting on a metric shit-ton of bad paper and lying about it’s value.
Congratulations Bernanke, your program along with Geithner’s that was intended to "fix things" has failed.
President Obama and/or Congress had better figure it out and change course fast, as it won’t be long before this camel pokes its nose in the tent of the marketplace.
