The Federal Reserve Fails to Reflate the US Banking System

[FRED]

The Federal Reserve Fails to Reflate the US Banking System

Movie shows the scale of the crisis, comparing past banking crises back to 1919 to the current crisis.

http://www.itulip.com/images/FedFAILbyiTulip.gif
(Refresh your browser to watch the movie again)

Charts in movie format

Version I
<object height="344" width="425">


<embed src="http://www.youtube.com/v/pZsY1rFr_yw&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="344" width="425"></object>

Version II
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/aeb247Vc1eY&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/aeb247Vc1eY&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>


Why are the Fed's lending facilities not working this time as in the past?

A few readers asked if the BORROW data are CPI adjusted. The answer is, no. We tried it and it just didn't make that much difference. Our point is this crisis on a different scale than previous crises. Adjusted for CPI does not change that, and you can't choose an inflation adjustment option to produce a chart from the Fed's site, and we wanted to use the Fed's own charts.

Here's the final chart with the date adjusted for CPI inflation, for the purists.

http://www.itulip.com/images/fedborrowCPI.gif


Doesn't change the story.

[cbr]

clearly off the charts today no matter what the analysis, but out of curiousity is this chart in actual or adjusted dollars?

[FRED]

clearly off the charts today no matter what the analysis, but out of curiousity is this chart in actual or adjusted dollars?

The charts are right off the Fed's web site. The Fed does not inflation adjust the BORROW data.

$3 billion in 1919 had the purchasing power of $36 billion in 2007; the $698 billion in Nov. 2008 borrowing is 20 times the size of the 1919 crisis borrowing in real terms.

[grapejelly]

fascinating...thank you!

[strittmatter]

Because you can shove the dead horses nose into the trough but you can't make him swallow???????

http://www.itulip.com/forums/showthread.php?t=7461

EJ: Back in 2003 I found a wonderful paper written by a Bank of Japan economist about how their FIRE-sector deflation spilled over into their production/goods economy, the mechanisms of that spillover, and how the nation wound up with deflationary problems. Now Bernanke of course says in his speech that he’ll make his own mistakes, he’s not going to make other guys’ mistakes, so he doesn’t need to be reminded of what the Japanese did or didn’t do or U.S. policy makers in the 1930s.

For practical purposes the effective federal funds rate is already at zero. His monetary policy seems to be spent. The latest gambit is to print money and buy mortgage-backed securities. Do you think that will work?

MH: No. For starters, it doesn’t apply to negative equity. Nobody is going to make new loans or renegotiate debts for the quarter of U.S. real estate whose debt already is larger than the current market price. There is still an enormous debt overhead that has to be written down. Credit inflation – that is, “solving” the debt problem by extending yet more debt – is not going to address that problem.

[LargoWinch]

Great stuff Ed. It is like sarcasm in pictures!

Now lets all buy T-Bills and make sure we deal only with the Bank of Sealy because we all know that gold is such a barbaric relic.

Besides, my 29 year old investment advisor does not seem to know where or why on earth I should buy gold bullion.

[Andy]

Thanks for posting this! As if the static charts weren't scary enough, this animated one is really ominous...

[magicvent]

Have you seen this

http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0901/document/us0109.pdf

[audrey_girl]

Thanks for posting this! As if the static charts weren't scary enough, this animated one is really ominous...

the only thing missing from this is the shark music from jaws

:eek:

[Chief Tomahawk]

Somewhere, Fred, you've made Mike Shedlock, aka Mish, very, very happy. He wants to abolish The Fed.

[Charles Mackay]

Why are the Fed's lending facilities not working this time as in the past?


$50 trillion in credit default derivatives that can't clear.

[*T*]

Why are the Fed's lending facilities not working this time as in the past?

Declining collateral as I'm sure you all know.

Housing is halfway there perhaps, when it has bottomed, the we get our poom.

Unless you regard govt. lending as a bubble, in which case that has to bottom too. Not sure how that part plays out though.

[udod]

The number sounds really scary indeed. But for any sort of serious argument, it has to be inflation-adjusted.

[metalman]

The number sounds really scary indeed. But for any sort of serious argument, it has to be inflation-adjusted.

inflation adjusted, 20x the s&l crisis vs 87x nominal. in any case, just look at the frigging graph. inflation adjusting makes the difference between a 9.0 and 9.5 rickter scale disaster. either way, the point holds... a history making crisis on a new scale...

[bart]

the only thing missing from this is the shark music from jaws

:eek:


http://www.nowandfutures.com/g2/jaws_theme.mp3 :cool:

[FRED]

the only thing missing from this is the shark music from jaws

:eek:

Then you will appreciate the movie version created today by iTulip's video production group Low Production Values Television (LPVTV).

<object height="344" width="425">


<embed src="http://www.youtube.com/v/pZsY1rFr_yw&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="344" width="425"></object>

[FRED]

The number sounds really scary indeed. But for any sort of serious argument, it has to be inflation-adjusted.

A few readers asked if the BORROW data are CPI adjusted. The answer is, no. We tried it and it just didn't make that much difference. Our point is this crisis on a different scale than previous crises. Adjusting the BORROW data for CPI inflation does not change that. You can't choose an inflation adjustment option to produce a chart from the Fed's site, and we wanted to use the Fed's own charts.

Here's the final chart with the date adjusted for CPI inflation, for the purists.

http://www.itulip.com/images/fedborrowCPI.gif


Doesn't change the story.

[walenk]

I remember well 'the crooked E' of Enron. This looks like a 'L' knocked on its ass.

[LargoWinch]

Great clip Ed! Good choice of music too for a baby boomer (my assumption here).

My take from this: Deflation is coming!

[FRED]

Great clip Ed! Good choice of music too for a baby boomer (my assumption here).

My take from this: Deflation is coming!



Allow me to introduce you to a web site that has that topic covered.

Lessons from Japan: The Devil's in the Details Part I - Asset price deflation versus general prices (http://itulip.com/forums/showthread.php?t=6910&highlight=details)
Deflationistas get the facts wrong about Japan (http://itulip.com/forums/showthread.php?t=7463)
Debt Deflation Bear Market Update Part I: 2009 Windup - Eric Janszen (http://itulip.com/forums/showthread.php?t=6521&highlight=deflation)
Debt Deflation Bear Market Update Part II: 2009 Pitch (http://itulip.com/forums/showthread.php?t=6504&highlight=deflation)
Still no deflation: Disinflation then lots of inflation (http://itulip.com/forums/showthread.php?t=5709&highlight=deflation)
No Deflation! Disinflation then Lots of Inflation - Janszen (http://itulip.com/forums/showthread.php?t=417&highlight=deflation)

[Rajiv]

You may also want to do the roller coaster ride similar to the one done with Shiller's real Estate Index as shown in this thread

Real Estate Roller Coaster (http://www.itulip.com/forums/showthread.php?t=1164)

[GRG55]

Then you will appreciate the movie version created today by iTulip's video production group Low Production Values Television (LPVTV).


Well that was inspirational...:rolleyes:

After watching this kept going 'round n 'round in my head

And we sang dirges in the dark
The day the music died.

We were singing,
Bye-bye, Miss American pie...

[BadJuju]

Allow me to introduce you to a web site that has that topic covered.

Lessons from Japan: The Devil's in the Details Part I - Asset price deflation versus general prices (http://itulip.com/forums/showthread.php?t=6910&highlight=details)
Deflationistas get the facts wrong about Japan (http://itulip.com/forums/showthread.php?t=7463)
Debt Deflation Bear Market Update Part I: 2009 Windup - Eric Janszen (http://itulip.com/forums/showthread.php?t=6521&highlight=deflation)
Debt Deflation Bear Market Update Part II: 2009 Pitch (http://itulip.com/forums/showthread.php?t=6504&highlight=deflation)
Still no deflation: Disinflation then lots of inflation (http://itulip.com/forums/showthread.php?t=5709&highlight=deflation)
No Deflation! Disinflation then Lots of Inflation - Janszen (http://itulip.com/forums/showthread.php?t=417&highlight=deflation)

The information in those articles is highly illuminating, if not somewhat grim and vexing for a 22-year-old (23-year-old in 1 hour and 25 minutes :eek:) looking to conquer the world. :p

[FRED]

Well that was inspirational...:rolleyes:

After watching this kept going 'round n 'round in my headAnd we sang dirges in the dark
The day the music died.

We were singing,
Bye-bye, Miss American pie...



Oh, we're working on that, too (http://www.itulip.com/audio/AmericanPie.m4p). :D

[audrey_girl]

Oh, we're working on that, too (http://www.itulip.com/audio/AmericanPie.m4p). :D

very impressive - as usual

many, many thanks to the itulip team


- AG

[Chris Coles]

That is by far the best video the iTulip team have produced so far. Excellent!

In the past we used to say the United States sneezes and the UK catches a cold. But this time we are the ones with the very bad cold and the US, (due to the relative dynamics of the economies), has just sneezed. So watch us closely as the UK is into this relatively deeper that anyone.

Prediction: Everything that will happen to the UK economy will repeat itself with the US economy. The UK will lead with the symptoms, the sneezes, but this time, perhaps, the US will catch the cold....

[Rajiv]

Maybe google satellite images of the FED with $1B being 1 mile at various altitudes????

[bart]

Another view of the same data recently, except on a weekly basis (the Fed only publishes it monthly).

http://www.nowandfutures.com/images/total_borrowings_from_fed.png

[BadJuju]

Any idea what caused the huge dip around December, bart?

[bart]

Any idea what caused the huge dip around December, bart?

$135 billion of it was a temporary drop in the Term Auction Facility balance, and another $30 billion or so was a similar drop in the Primary Dealer Credit Facility balance.

Both could easily have been Fed reporting date & data capture issues. It could literally disappear next week when I update the underlying data, and I think its safe to ignore it.

[Steve Netwriter]

Brilliant vid guys :) :)
I think it makes the point very well.