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Economy
US credit shrinks at Great Depression rate prompting fears of double-dip recession
2009-09-15
Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation.
...
"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness." The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.

Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc. "For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said. It is unclear why the US Federal Reserve has allowed this to occur.
Posted by:3dc

#14  I was told there would be no math, newc. :-(
Posted by: Barbara Skolaut   2009-09-15 23:48  

#13  you will see inflation and you shall see another reduction in jobs. China cut up the US credit card and no one else will finance your power bill at this point.

This is a terse warning that things are going to fall into collapse.

The state department are buying foreign currency. you do the math.
Posted by: newc   2009-09-15 23:47  

#12  He has hope?
Posted by: Skunky Glins****   2009-09-15 23:32  

#11  The last thing this government wants to see is deflation. That's a major loser for Obamas re-election hopes.
Posted by: Mike N.   2009-09-15 21:26  

#10  "WHAT DO I DO NOW???"

If deflation is predicted, the buying power of dollars goes up. So you invest in dollar instruments (CD's, treasuries, etc)

Yes, you see low yield earnings. But they are positive, not negative.
Posted by: flash91   2009-09-15 16:49  

#9  High Dividend yield is the way to go, or farmland!

Remember this is falling CREDIT supply, not money supply. This is the liquidation of failed businesses that only existed with the artificial stimulus of spending future wealth now.

Good businesses will survive, the chaff will go, and thus the economy will grow.
Posted by: Bright Pebbles   2009-09-15 14:57  

#8  Ford Motor, Southern Company, and BP all pay modest dividends. No dividends, no strong market 5-10 year performance history....no money from Besoeker.
Posted by: Besoeker   2009-09-15 13:28  

#7  Alan C,

In deflationary times, cash is king.

Otherwise, gold stocks. I'm not a gold bug, but the Chinese want to run down their USD holdings and gold is their only real alternative. And gold is a hedge against USD declines for Americans.
Posted by: phil_b   2009-09-15 13:24  

#6  WHAT DO I DO NOW???
Posted by AlanC

I'llbephuechedifInow AlanC. Join the club.
Posted by: Besoeker   2009-09-15 13:18  

#5  I keep most of my cash in my local Credit Union, and a grand (Or so) in cash well hidden.
I seriously think the stock market (as an institution) will be OK, mainly because so many wealthy "Lawmakers" have too much in to cash out.

On a side note I bought a small bit of Ford(F) this morning, it's to make me follow Ford as the weeks progress, but if I lose a bit, it won't hurt me.(Seems to be the only Viable auto maker here in the USA)they've doubled in the last 2 months.
Posted by: Redneck Jim   2009-09-15 12:52  

#4  Seriously, what do you 'burg experts suggest for trying to maintain one's retirement (involuntary)? My IRA is currently all in money markets (put there in April) because I'm scared of inflation and the stock/bond market crashes.

WHAT DO I DO NOW???
Posted by: AlanC   2009-09-15 12:38  

#3  In any case, the Keynesians have been using MMGW logic.

That is, that a fraction of a trace gas can push around climate forces of immense scale; but in this case, that the economic micromanagement of the US economy can push around the global economic forces in the hundreds of trillions of dollars of debt.

For months now, prognosticators have suggested that this month, in mid-to late-September, this "1930 spring" is going to come to a resounding end. That we are literally just days away from catastrophic failure.

Only with luck will we make it to October 1st, and the start of the next fiscal year. But likely October will be a hell month, with November not much better.
Posted by: Anonymoose   2009-09-15 11:46  

#2  The engine room, she's now flooded captain! Yes, yes of course Lionel. Remain cool please, no panicking. That is indeed Zimbabwe off our port. Be a good chap now, take my Webley and shoot anyone attempting to get into the boats before I give the command. Is that clear?
Posted by: Besoeker   2009-09-15 11:39  

#1  This article conveniently forgets to mention that the money supply has more than doubled in the past year and could not continue.
Series: BASE, St. Louis Adjusted Monetary Base

More worrying is the business credit contraction that is putting the brakes on production and employment.
Posted by: ed   2009-09-15 10:08  

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