Posted on 07/28/2008 9:03:10 PM PDT by JerseyHighlander
GDP is increasingly making the exonomy look better than it is. By the definition of the GDP, if we buy something from China and then ship it from place to place in the US, we’re generating GDP every time we move it to another warehouse. WOO-HOO!
The writer has a point regarding commodities...Oil and Copper stocks, previously high-flying, are coming down to Earth very quickly...It’s a battle between how fast “Helicopter” Ben can print money and the rate of money destruction due to debt losses...Either way, the dollar - and our standard of living - takes it on the chin.
Thanks for posting. Great read.
He won't permit a deflationary spiral.
This is not a log chart. Why would extending the blank part of the graph down to zero change the steepness of the slope?
Shhhssshhh! Don't inject an analytical question into the mix!
This is a most interesting post and will take me some time to digest the figures.
The chart shown in the post does not correlate with the charts at St. Louis Fed. Reserve for loans (which may be optimistically toned down by misclassification). Their charts show debt levels of businesses slowing and not going “vertical:”
http://research.stlouisfed.org/publications/usfd/page17.pdf
However, this one is scary:
http://research.stlouisfed.org/publications/usfd/page16.pdf
It shows Fed’s holding of Treasury collateral vs. Term Auction Credit. Maybe this post explains this last page of money confusion.
Are Fed loans “money” supply if they’re never to be paid back (realistically)... or are they “assets” that will sit on the books forever. Maybe someone can enlighten me.
Unfortunately, like the Fed, the chart above starts the origin way above zero. So it’s hard to tell if there are significant trends. If we can answer the question of “what is a loan by the Fed’s current definition” then we can see more clearly what the true money supply growth has been. Right now it is quite conservative over the last few months:
http://research.stlouisfed.org/publications/usfd/page6.pdf
Just got my print edition with those graphs today, haven’t read through it yet.
The author of the graph had access to Total Credit Market Debt numbers from inside the Fed.
As you mentioned, the number he is using might not be what the St Louis Fed is publishing.
And I can’t answer the question with anything more than another question, how are level 3 market debt being reported to , then classified and disseminated inside the Fed Reserve’s economist groups?
Can’t answer that.
Bump for later reading
You ain't seen anything yet . . .
uh-oh
Well, if you get a handle on when these Fed “loans” will be called back in... please give the rest of us a heads-up.
Because that’s a question a lot of people have.
I would NB that Bernanke (and Paulson) have called for the TAF (et al) programs to be made permanent:
“Based on our initial experience, it appears that the TAF may have overcome the two drawbacks of the discount window, in that there appears to have been little if any stigma associated with participation in the auction, and—because the Fed was able to set the amounts to be auctioned in advance—the open market desk faced minimal uncertainty about the effects of the operation on bank reserves. The TAF may thus become a useful permanent addition to the Fed’s toolbox.3 TAF auctions will continue as long as necessary to address elevated pressures in short-term funding markets, and we will continue to work closely and cooperatively with other central banks to address market strains that could hamper the achievement of our broader economic objectives.”
From:
http://www.federalreserve.gov/newsevents/speech/bernanke20080110a.htm
Notice that they want public comment. Yea, right, like any of our concerns would be addressed or even acknowledged.
Taxpayer (Housing bailout) -> Fannie Mae -> Banks -> Fed replenishes Treasuries
It has nothing to do with being a log chart or not. If you "break the axis", you give the impression of greater change than is actually contained in the graph. As the graph now stands, it appears that there is this wild swing with a huge upward movement. If you started the axis at zero, it would almost look like a horizontal line precisely because of the huge blank space at the bottom. People with foregone conclusions draw graphs like this to try and make a point where none exists.
Al Gore did the same thing with his temperature data. It has the same huge upward swing over time, making it look like an inverted hockey stick with this ominous uptick in temperature over the past several decades. The problem is that the vertical axis was "broken" and the units were in very small units (hundredths of a degree, I think). As a result, a half a degree change in temperature was made to look like huge upswing. When you set the axis to 0 (or 32 degrees, since many temperature charts start at freezing), the temperature line was virtually horizontal making the data look normal. Since that wasn't the message Al was trying to get across, he broke the axis to make the swing look more dramatic. I'm always suspect when I see such graphs.
You make a point that is often valid, but is not in this case. It wouldn't look anything like a horizontal line. The chart starts at 125% and goes up to 350%. If you start the chart at 0, the huge increase from 1995 or so would still take up a third of the chart. The increase from the low after the depression would take up 2/3 of the chart. Still a very scary looking chart. Which isn't really the point of the article...
Oh brother. If the graph having a blank inch or two at the bottom throws you, maybe this is a little to complex for you.
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