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Posts Tagged ‘flow of funds’

A ‘Graphic’ View of the U.S. Credit Collapse

Posted by Larry Doyle on December 14th, 2010 6:28 AM |

If a picture paints a thousand words, then the graphs I am highlighting today would encompass many volumes. I thank the regular reader of Sense on Cents who brought them to my attention. Major prop to Barry Ritholtz of The Big Picture who ran this commentary yesterday. Major credit to the writer at the Global Macro Monitor blog.

The Global Macro Monitor blog was started by an independent trader and economist and, in a prior life, was a global macro hedge fund PM/trader, headed emerging market bond trading desks on Wall Street, and an economist/global strategist, beginning his career at the World Bank in the mid 1980’s. His unique and unconventional views are reflected on his website at marcromon.wordpress.com.

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We constructed these charts with data from today’s release of the Federal Reserve’s Flow of Funds. They are both stunning and frightening as they illustrate the cardiac arrest that took place in the credit markets. The collapse in credit issuance/borrowing began in 2008 and would have been net negative without the Federal government. In 2009, for example, the Federal government was 141 percent of total net credit borrowings. (more…)

Time to Reinstitute Glass-Steagall

Posted by Larry Doyle on December 3rd, 2009 3:16 PM |

A car needs gas to run. An engine needs steam. A factory needs power. The fact is without a steady source of energy nothing can operate. Welcome to the Uncle Sam economy circa 2009.

You may be thinking, wait a second LD . . . the Federal Reserve is flushing the system with liquidity. Money is easy and it is propping the markets. While availability of credit may be tight, the demand for credit is also weak. So what am I talking about?

Thanks to RM for providing the FDIC Third Quarter 2009 Banking Profile (a link to the full document is provided at the end of this commentary). For those who care to rip apart the inner workings of our banking system, this report is the owner’s manual. The report highlights the following:

> Industry Posts Net Profit of $2.8 Billion
> Increased Revenues, Lower Securities Losses Offset Higher Loan-Loss Provisions
> Net Interest Margins Improve at Most Institutions
> Troubled Loans Continue to Rise, But Rate of Growth Slows
> Loan balances Decline by 2.8% in the Quarter

Based on this overview, it would appear that the banking industry is slowly recovering. In aggregate, perhaps that may be the case. But what doesn’t this report tell us? (more…)






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