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The Federal Reserve Fails to Reflate the US Banking System

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  • The Federal Reserve Fails to Reflate the US Banking System

    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.


    (Refresh your browser to watch the movie again)

    Charts in movie format

    Version I





    Version II


    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.



    Doesn't change the story.
    Last edited by FRED; 01-28-09, 04:05 PM.
    Ed.

  • #2
    Re: The Federal Reserve Fails to Reflate the US Banking System

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

    Comment


    • #3
      Re: The Federal Reserve Fails to Reflate the US Banking System

      Originally posted by cbr View Post
      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.
      Ed.

      Comment


      • #4
        Re: The Federal Reserve Fails to Reflate the US Banking System

        fascinating...thank you!

        Comment


        • #5
          Re: The Federal Reserve Fails to Reflate the US Banking System

          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.



          Comment


          • #6
            Re: The Federal Reserve Fails to Reflate the US Banking System

            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.

            Comment


            • #7
              Re: The Federal Reserve Fails to Reflate the US Banking System

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

              Comment


              • #8
                Re: The Federal Reserve Fails to Reflate the US Banking System

                Have you seen this

                http://web-xp2a-pws.ntrs.com/content...ent/us0109.pdf

                Comment


                • #9
                  Re: The Federal Reserve Fails to Reflate the US Banking System

                  Originally posted by Andy View Post
                  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:

                  Comment


                  • #10
                    Re: The Federal Reserve Fails to Reflate the US Banking System

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

                    Comment


                    • #11
                      Re: The Federal Reserve Fails to Reflate the US Banking System

                      Originally posted by FRED View Post
                      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.

                      Comment


                      • #12
                        Re: The Federal Reserve Fails to Reflate the US Banking System

                        Originally posted by FRED View Post
                        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.
                        It's Economics vs Thermodynamics. Thermodynamics wins.

                        Comment


                        • #13
                          Re: The Federal Reserve Fails to Reflate the US Banking System

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

                          Comment


                          • #14
                            Re: The Federal Reserve Fails to Reflate the US Banking System

                            Originally posted by udod View Post
                            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...

                            Comment


                            • #15
                              Re: The Federal Reserve Fails to Reflate the US Banking System

                              Originally posted by audrey_girl View Post
                              the only thing missing from this is the shark music from jaws

                              :eek:

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

                              Comment

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