The Economy is NOT Improving: 3rd Estimate of Real GDP Falls to 1.8 Percent from 2.0 for Q3 2011

What a joke the news is today. GDP is revised down and all you hear on the news is Ho! Ho! Ho!

Q2 GDP was 1.3 percent, and Q1 0.4 percent, for an average growth rate in 2011 so far of barely 1.0 percent.

One percent. From 1930 to 2000 growth averaged 3.5 percent a year. That's the normal America, and it isn't anywhere in sight and hasn't been in over a decade.

If the economy were improving truly, GDP would be much in excess of 2.5 percent, the minimum growth needed to accomodate just the natural growth of the population. The last time we had such growth ended a year ago September, spurious as it was, consisting primarily of parasitical spending by government. It wasn't even tax money the government spent. It was borrowed money. For all that, 2010 growth overall was merely 3.0 percent, in 2009 -3.5 percent, in 2008 -0.3 percent.

The personal savings rate since September 2010 has fallen 30 percent.

The ratio of the number employed to the size of the population has fallen back dramatically to levels last seen in the 1970s and early 1980s.

The growth in employment in the post-war period has stalled with the stall in GDP:

Household net worth has fallen 12 percent since 2006, 85 percent of that from the housing collapse.

Without jobs there is no growth in the savings which form the foundation of housing wealth. Without housing wealth there is no middle class which consumes the products whose aggregate value comprises 70 percent of GDP. And hence no advance in GDP.

A rich man can smoke only so many cigars, a Christopher Hitchens only so many Rothmans.

Data here and here from The Bureau of Economic Analysis.

Gasoline Consumption Down Every Week for Nine Months in 2011

We're having a little gas war in southeast Grand Rapids

Annual records for gasoline prices are taking their toll on the American economy, consuming as much as 0.5 percent of annual GDP.

As such, it's an example of a tax which only hurts, averaging over 5 percent of the typical household budget in the past but over 8 percent now.

The AP has the story here:

For this year, gas should average $3.53 per gallon. That's 76 cents more than last year. It's 29 cents per gallon more than 2008, when gas last set an annual record, $3.24. ... Compared with the year before, American gas consumption has been down every week for more than nine months, according to MasterCard SpendingPulse, a spending survey.

Second Estimate of Q3 2011 GDP Falls to 2.0 Percent from 2.5 Percent

Per the BEA today, here:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.0 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "second" estimate released by the Bureau of Economic Analysis.  In the second quarter, real GDP increased 1.3 percent.

The GDP estimates released today are based on more complete source data than were available for the "advance" estimate issued last month.  In the advance estimate, the increase in real GDP was 2.5 percent . . ..


So .4 in the first, 1.3 in the second, and now 2.0, for an average of 1.2 so far in 2011. That's not even treading water. Obama doesn't have a clue. The guy should pack it in and just go golfing for the rest of his life.

The Broadest Tax Base Which Can Possibly Be Imagined Implies a Tax Rate of 6.2%

Herman Cain's 999 Plan is focusing attention on the perennially perplexing problem of taxation for the American electorate in 2012. His plan has brought questions about broadening the tax base for tax reform front and center, including: What tax base is large enough to generate adequate federal revenues? and: What rate of taxation is fair?

Herman's big idea is to scrap the entire tax code and start over with three new bases taxed at the same low rate for a temporary period of time, eventually transitioning the country permanently to just one of these bases, taxed at a much higher single rate.

His scheme is quite conventional in that it looks to the existing traditional bases of taxation with which we have been familiar for decades: corporations and individuals.

What is new, however, is the national sales tax, the base for which was fairly sizable in 2008 at $10.1 trillion in personal consumption expenditures [PCE], and running at almost $10.8 trillion annualized through August 2011.

Currently the overwhelming burden of taxation falls on the individual filer whose personal income is taxed in order to provide Social Insurance and Federal revenues, which in 2011 are currently running at an annualized rate of $2.3 trillion, as shown here by the Bureau of Economic Analysis. Corporations, excises and tariffs provide puny sums by comparison: less than $500 billion in 2008.

This means that in 2011, Herman Cain's ultimate idea of taxing consumption to replace current revenues of approximately $3 trillion would imply a national sales tax rate of 28 percent on $10.8 trillion in goods and services expenditures this year. That's a pretty hefty rate by comparison with present conditions.

Currently the personal income base on which we exact that $2.3 trillion in Social Insurance and Federal taxes is just over $13 trillion. This implies an overall tax rate of 18 percent. If personal income in that aggregate amount had to do all the pulling to generate the full $3 trillion in revenues, personal income would have to be taxed at a rate of 23 percent to do the same thing as the consumption tax. Not as high, but still much higher than the 9 percent Herman Cain has called for currently, if only temporarily, in deference to the God of the Bible who asked for just 10 percent from his chosen people.

By way of comparison, if there were some way to easily tax GDP, currently running at $15 trillion, the effective tax rate would have to be 20 percent.

So is there a tax base which is broader still, from which we can derive the necessary sums and get that rate even lower?

Given that people by definition receive income in consequence of the conduct of business of one kind or another (aside from gambling, prostitution and bank robbery), it seems reasonable to look at the size of the various tax bases available strictly from businesses, without whom none of the other tax bases would exist in the first place. If we really mean it when we say we want to tax income only once, we need to go to its source, and for nearly everyone in our society, that source is business.

Corporations in 2008 had total receipts of $28.5 trillion, 2.8 times the size of Herman Cain's PCE tax base. It would have taken a gross receipts tax of merely 10.5 percent on this sum to have generated $3 trillion in tax revenue in tax year 2008, a year when revenues were actually lower at $2.5 trillion. That implies a gross receipts tax of only 8.8 percent on corporations in 2008.

In such a world, there would be no more income taxes on individuals, no Social Security or Medicare taxes either, and no capital gains taxes nor taxes on investment income or savings of any kind, and government would not go wanting. Nor would business be constrained by other taxes and fees imposed on it if we were to throw out the current code and replace it with this simple levy.

But the base could be made broader still in order to lower the effective rate even more.

Add in partnerships, which had $5.9 trillion in total receipts in 2008. And S corporations, which had $6.1 trillion in total receipts in 2008. Both of these added to corporation total receipts yields a gargantuan tax base for 2008 of $40.5 trillion in gross receipts.

All of that could have been taxed at a mere 6.2 percent to meet the federal revenue of $2.5 trillion collected in 2008.

No more talk of a flat income tax, nor of a progressive income tax, nor of a consumption tax. No more compliance costs of $450 billion because of the current code. No more lost time equivalent to 3 million full time jobs.  Just one, low, simple, rate on business. That's it.

In addition to God, John Tamny might go for it, too:

"The answer as always is for the government to simply get out of the way. If it must tax corporations, its taxation should be blind in the way that justice is. A flat gross receipts tax would make all corporations equal before the IRS. That would ensure the most economic allocation of capital on the way to rational, market-driven growth."

Morgan Stanley's Stephen Roach Ridicules Fed's War on Savers, Who Are Indispensable to Future Growth

He is quoted here at CNBC.com, identifying zero interest rate policy as

"financial repression practiced by your favorite central bank, the Federal Reserve. The idea that we can run zero interest rates in perpetuity and penalize savers is absurd."

"Do you know that half of American workers have no retirement fund?"

"How else are we going to fund economic growth?"

"Right now we’re borrowing surplus savings from abroad because we don’t save a nickel at home, and we have to wean ourselves from that."

Last week's GDP release indicated a precipitous fall in the personal savings rate of 20 percent in the third quarter to 4.1 percent annualized as Americans spent all their minor wage gains and diverted monies from savings just to keep up with rising prices for food, energy and healthcare, among other things.

They are not buying major appliances with the money, as Whirlpool is set to lay off 5,000 in coming months due to rapidly falling sales.

Herman Cain's National Sales Tax Might Make Renters Better Off, With Transitional Problems For Existing Owners of Residences and Rental Income Properties

An important study published in 2008 here simulating the effects of the Fair Tax, Herman Cain's ultimate goal, namely a consumption tax to replace all other federal taxation, concluded the following about its impact on housing:

The enactment of H.R. 25 thus causes the homeownership rate to gradually decline as the demand for housing falls. Demand for owner-occupied housing decreases because of the elimination of the tax on normal returns to capital in the nonresidential and rental housing sectors (which reduces the relative tax advantage of owner-occupied housing) and the elimination of the tax deductions for mortgage interest and property taxes. Note that under H.R. 25 all consumption goods are treated roughly the same since most nonresidential consumption is taxed, rental housing payments are taxed, and the tax on new investment in the owner-occupied sector is roughly equivalent to a front-loaded or prepaid tax on the flow of housing services from such investment; only housing services from existing, owner-occupied housing are untaxed. As a result, there is no preferential tax treatment of new investment in owner-occupied housing under H.R. 25. Because of this, a portion of the investment in owner-occupied housing that would have occurred under the income tax is shifted to the nonresidential and rental housing sectors. Rental capital as a share of the total capital stock increases from 13.4 percent to 13.7 percent in the long run and the output of rental housing as a share of total housing output increases from 24.9 to 26.2 percent. This decreases the real price of rental housing services as the stock of rental housing increases, which makes renters better off. ...

Our results indicate that such a reform would generate significant overall macroeconomic improvement in both the short and long runs, reflecting the labor supply and savings responses to lower overall tax rates on labor income and the elimination of the taxation of normal returns to capital income (a marginal effective tax rate of zero on the income earned by new investment). In particular, the model simulation results indicate that GDP would increase by 3.8 percent in the long run, reflecting a 2.9 percent [increase] in labor supply and a 5.3 [percent] increase in overall investment. However, the implementation of such a reform would raise some significant transitional issues, especially in the housing sector. These can be grouped into effects on the owner-occupied housing sector and the rental housing sector. ...

[T]he simulations suggest that the prices of existing homes would fall by 10.1 percent in the year of enactment of H.R. 25, although this effect would dissipate rather quickly, with declines of only 2.6 percent two years after reform, 1.2 percent five years after enactment, and no effect in the long run. ...

[T]he real value of existing rental housing would decline by 25.7 percent in the year of enactment of reform, and this decline would remain roughly constant, with a long run decline of 25.8 percent. These declines arise because investments in rental housing were made on the assumption of continued depreciation deductions under the income tax, but these deductions disappear under the sales tax while rents are fully taxed under the new regime.

GDP, Q3 2011 First Report, at 2.5 Percent; Personal Savings Drop Big

See the full pdf at the Bureau of Economic Statistics, here.

Personal savings fell a full percentage point, or $116 billion, while personal disposable income went up $17 billion, matching exactly the increase in personal outlays of $133 billion.

Get it? People are saving less and spending any increases just to get by because of . . . increasing prices.

A falling savings rate, now at 4.1 percent, is woefully inadequate. A person saving at that rate making $50,000 per year would need over 12 years to save just 6 months' expenses.

Artificial GDP Explained

By Jeffrey Snider, here.

A tax will have to be paid for it, sooner or later. There will be blood.

Reuters' Mike Dolan Gets It Wrong On Depressions

The relevant passage from his story here on the recent debate about whether we've had, face, or are in a depression makes a real hash of it:

But search for a precise definition of economic depression and you'll be hard pressed to find anything more specific than it's more severe than typical business cycle recessions, tends to cross multiple countries and lasts much longer.

Anecdotal rules of thumb -- cited in The Economist magazine and elsewhere -- center on a peak to trough drop in real gross domestic product of more than 10 percent or recessions lasting more than three years.

On that measure, the 1929-1933 Great Depression in the United States qualifies with a 27 percent loss of GDP and a peak unemployment rate of some 25 percent. The shorter 1937 and 1945 downturns qualify on the GDP measure alone too.

"Hard pressed"? The most useful rule of thumb learned way back in my childhood is not even mentioned: back-to-back years with GDP declines, on the analogy of recessions, which are back-to-back quarters with GDP declines. String out a recession long enough with annual GDP failing to surpass a previous high and you have a depression.

People may have to disagree about such definitions, but not about the data behind the theory.

The GDP decline of the 1929 depression is not correctly represented by the writer. Nominal GDP in 1929 was $103.6 billion, falling to its nadir in 1933 to $56.4 billion, a 45.56 percent drop, not 27 percent as the author states. It took until 1941 to surpass 1929 GDP.

Nor did GDP decline from 1937 to 1938 by more than 10 percent. It declined by 6.3 percent, from $91.9 billion to $86.1 billion. But GDP in 1939 exceeded that achieved in 1937, technically not a depression within a depression because there weren't back-to-back years of GDP decline.

And the GDP decline between 1945 and 1946 was a measly 0.36 percent, falling to $222.2 billion from $223 billion. The $1.9 billion decline between 1948 and 1949 was only 0.71 percent.

Missing from the story are the real 10 percent or greater depressions in the 20th century apart from The Great one: the depression of 1907-1911, when nominal GDP fell by 11.1 percent; and the depression of 1920-1925, when GDP fell almost 17 percent. Prohibition, dontchaknow. The roaring '20s were really a lot shorter than ten years.

If the 2008-2009 depression will compare to anything, it will be to 1937-1938's 6.3 percent decline, or to 1913-1916 when GDP fell 6.6 percent. The problem is the numbers are still fluid. The numbers from the Bureau of Economic Analysis still show a nominal decline in one year only, 2009, of 1.8 percent from 2008, despite reports of larger nominal declines in 2008 from 2007 and in 2009 from 2008 in the neighborhood of 3.8 percent.

If it's pretty clear we've had at most only a very small depression, we're technically out of it in 2010 due to government spending. It's equally clear, however, that current GDP is so anemic in the aftermath that we may well repeat the episode.

Herman Cain's 999 Plan Would Have Cut Corporate Taxes in 2008 by 64 Percent

Average annual corporate profits for 2008, 2009, and 2010 were $1.47 trillion.

The average annual corporate tax paid on those profits was $331 billion for an average annual corporate tax rate of 22.5 percent.

How Herman Cain thinks he can lower the rate to 9 percent and still have enough revenue in combination with a 9 percent income tax rate and a 9 percent national sales tax rate is beyond me.

In 2008, those 9 percent rates would have yielded a mere $112 billion in corporate taxes (instead of the $309 billion actually collected), $400 billion in sales taxes, and $765 billion in income taxes, or $1.223 trillion short of the $2.5 trillion actually collected by the federal government.

If Cain leaves social insurance taxes in place, which would make it a 9997.65 Plan, not a 999 Plan, the $900 billion collected in 2008 in FICA taxes would still have left him $323 billion short of actual revenue collected in 2008.

See the corporate profits data in Table 11 from the Bureau of Economic Analysis, here:

Final Estimate of Q2 2011 GDP at 1.3 Percent

As reported by the Bureau of Economic Analysis, here.

With Q1 GDP at 0.4 percent, average GDP is at a paltry 0.85 percent so far in 2011.

Average annual GDP from 1930-2000 was 3.5 percent.

For the ten years from 2000 it averaged 1.67 percent (Europe was worse, at 1.5 percent).

A measly 0.85 percent in 2011 is stall speed, and that means less government revenue, which makes the deficit worse and the national debt grow, interest payments on which will exceed $434 billion this year, about one eighth of current spending of $3.8 trillion, or 12 percent.

Think of that as having to make interest payments on debts of $236,000 totaling $7,440 every year, $620 every month, on a salary of $62,000.

The implied interest rate of 3.15 percent won't last forever, but let's be generous and assume it does while what you owe keeps growing by 9 percent per year for the next decade because you keep spending and you never pay it down. Let's also assume you get a crummy annual raise of 1.7 percent every year for ten years.

Now you'll owe over $596,000 supported by a salary of nearly $74,000, but your interest expense will have grown to nearly $19,000 from $7,440 ten years prior, amounting now to 25 percent of your income as compared with 12 percent of your income then. More than doubled.

That's where America is headed . . . if interest rates don't rise and slow growth mirrors 2000-2010.  

The Economy Is Not The Same Thing As The Market, Or Is It?

Mark Hulbert reminds everyone here that the DOW quadrupled between July 1932 and March 1937.

He thinks analogists should think about that when drawing doomsday scenario parallels. He's surely correct that smart investors could make a lot of money if today's market replays the DOW from that period in The Great Depression.

But that's one hell of a big "if".

I don't buy the analogy.

For one thing, the Shiller p/e ratio then had fallen way below 10 to the near rock bottom levels near 5 once seen in 1920-1921. Today we're still around 19.

And then there's the little matter of GDP.

Having fallen from $103.6 billion in 1929 to $58.7 billion at the end of 1932, GDP began to rise again in 1934, reaching $91.9 billion by the close of 1937. From the GDP low of $56.4 billion in 1933, GDP rose nearly 63 percent in just four years of the DOW's five year cyclical bull recovery in that secular bear during the 1930s. Today growth is mired in the vicinity of 1 percent, after a decade of average annual growth of 1.67 percent. That was a raging fire then. We've only lit a match.

The depression of 2008-2009 was much too small by comparison to 1929-1940 to draw any meaningful parallels: a 46 percent drop in GDP over four years today would mean reducing our $15 trillion economy by nearly $7 trillion. We didn't drop even a half trillion dollars from GDP in 2009. And the last time the p/e ratio got close to the low 1921 and 1932 levels was in 1982.

We've had a little depression. A little growth and a little gain in the markets would seem to follow.

But since government can screw up a two-car funeral, anything is possible. 

Can No One Tell The Truth, Even About The Great Depression?

Seen here:

Between 1929 and 1933, U.S. gross domestic product contracted by around 30%.

Where the hell does that come from?

In 1929 GDP was $103.6 billion. By the end of 1933 GDP had declined to $56.4 billion. That's a decline of over 45 percent, not "around 30 percent."

Matthew Lynn for Marketwatch.com is talking about "the buying opportunity of a lifetime" at the link.

Really? With the Shiller price-to-earnings ratio at 20.43?

The buying opportunity of my lifetime was between 1973 and 1983, when the Shiller p/e ratio rattled around 10, fifty percent lower than it is today. And it just so happens that I didn't have any money to invest in those years like I do today because of a lifetime of saving.

Not even March 2009 was the buying opportunity of a lifetime, when the Shiller p/e fell to around 15.

If you are wise you will keep your powder dry until you see the whites in their eyes, so to speak, when we get to 10. But even then, can you live with yourself if you pull the trigger and then a total market collapse like 1929 brings the p/e closer to 5?

Well, can ya?

Remember the one true thing of Keynesianism: markets can stay irrational longer than you can stay solvent. A decline from 10 to 5 can wipe out 50 percent of what you have.

There is nothing which cannot repeat itself, because human nature does not change.

Year Over Year GDP Declines From 1900 to 1949

1904 $  0.23 billion (1903 level exceeded in 1905): 3 years/a decline of less than one percent

1908 $  3.75 billion (1907 level exceeded in 1911): 5 years/a decline of eleven percent

1914 $  2.62 billion (1913 level exceeded in 1916): 4 years/a decline of less than seven percent

1921 $14.79 billion

1922 $  0.20 billion (1920 level exceeded in 1925): 6 years/a decline of almost seventeen percent

1927 $  1.40 billion (1926 level exceeded in 1928): 3 years/a decline of less than two percent

1930 $12.40 billion

1931 $14.70 billion

1932 $17.80 billion

1933 $  2.30 billion

1938 $  5.80 billion (1929 level exceeded in 1941): 13 years/a decline of over forty-five percent through 1933 with an additional six percent drop in 1938 relative to 1937

1946 $  0.80 billion (1945 level exceeded in 1947): 3 years/a decline of less than one half percent

1949 $  1.90 billion (1948 level exceeded in 1950): 3 years/a decline of less than one percent

Current revisions to GDP for 2008 and 2009 show declines of 0.3 percent and 3.5 percent, respectively, making the severity of the GDP decline most like 1938, though still not yet as severe.

Depression of 2008-2009 Comparable to 1938 in GDP Decline

EU Crisis: PIIGS' Bankruptcy Could Dwarf Lehman's By Nearly Three Times

Phase One, in which Doris gets her oats, is now over.

Time to save your money. You're going to need it.

Carl Weinberg, the chief economist at High Frequency Economics is very worried about Europe. His central forecast is that the debt crisis will lead Europe into a depression that will mean soaring unemployment, deflation and zero interest rates for the foreseeable future.

After months of inaction, Weinberg believes the time to stop a Greek default has now passed. He believes that once it becomes clear that Greece has defaulted, the market will quickly come to the realization that other euro zone members like Portugal, Ireland, Spain and Italy will be allowed to fail as well.

With the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) sitting on 3 trillion euros in debt, Weinberg is assuming losses could ultimately hit 50 cents in the euro, leading to a 1.5 trillion euro hit to the financial system.

This will in Weinberg’s opinion force banks to stop lending. Governments will then be forced to bail them out, elevating debt-to-GDP ratios for national governments to "horrific levels".

Read the full story here.

The UK Depression is Huge, But the Response is a Shrug of the Shoulders

So says Martin Wolf for The Financial Times, quoted here:

For the present depression to be shorter than its longest predecessor, it must end not later than April 2012. But output is close to 4 percent below its starting point, with eight months to go. ...

The cumulative loss of GDP is likely to be worse this time even than in the 1930s. It was 17.7 percent of GDP back then, against 14.5 percent, this time, so far. But this depression is not over. If growth were to be 2 percent a year, the cumulative loss would be over 18 percent of GDP.

This then is a huge depression, by UK standards. Yet the response is a shrug of the shoulders.

In America we can't bring ourselves even to speak of 'economic depression,' so deep is our collective delusion caused by the widespread gnosticism of political correctness.

The United States has had back to back years of declining GDP in 2008 and 2009, followed by a mere balance sheet recovery in 2010 defined entirely by massive government spending. With the latter now nearly at an end, GDP is in the toilet.

The answer of the Democrats is to propose more fake GDP. And unfortunately for the Republicans, they're stuck with their free-trade religion which has misallocated hundreds of billions of dollars abroad, especially to China, and with it all our jobs.

Where are the Patriots?

Q2 2011 GDP Revised Down to 1.0 Percent from 1.3

As reported here.

Evidently Q1 remains at 0.4 percent.

Growth at these low levels implies a rise in unemployment since there isn't enough growth even to absorb the increase in population hitting the workforce.

Expect continued deterioration in the employment to population ratio.

Unprecedented Weakness in Consumer Spending Growth in Post WWII Period

So says Stephen Roach of Yale, here, who can't call this is a depression evidently because such anemic growth is, afterall, growth. He must not dwell on the overall negative back to back GDP prints for 2008 and 2009.

He prefers "Great Crisis" and the term "unprecedented" to describe what many others have rightly identified as a balance sheet recession. He does not see this being repaired any time soon, however, because we're nowhere near the needed savings rate of 8 percent nor the 75 percent level of debt to disposable personal income:

The number is 0.2%. It is the average annualized growth of US consumer spending over the past 14 quarters – calculated in inflation-adjusted terms from the first quarter of 2008 to the second quarter of 2011. Never before in the post-World War II era have American consumers been so weak for so long. This one number encapsulates much of what is wrong today in the US – and in the global economy.

There's hardly a more succinct and elegant framing of the issue to be found in what follows after that.

Net Return On Massive Secret Loans To Biggest Banks By Federal Reserve Was Barely 1 Percent During Subprime Meltdown Between 2007 and 2009

Bloomberg has the story here.

This while home buyers in the US in 2007 with excellent credit were paying 6 percent or more for 30 year fixed rate mortgages.

Here's the propaganda line from the article:

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages.

But the depression wasn't averted, no matter how much lipstick Bloomberg tries to put on this pig:

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Instead of "banks and the economy remain stressed," how about, "it was a depression nevertheless"? We now know thanks to revised GDP numbers released by the government in its annual revision in July that GDP went slightly negative for the first time in 2008, followed by a substantial negative GDP report for 2009. Two back to back years of negative GDP are a depression, just as surely as two back to back quarters of negative GDP are a recession. Clearly not the Great Depression, but a depression nonetheless.

Yet we still can't bring ourselves to say it.

As usual, the banks are ground zero for depression, whether it's under the Federal Reserve Act of 1913 which was meant to prevent booms and busts, or not:

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Why do you think there's been such a flight to cash ever since, first by the banks, then by the corporations, and now by the citizenry, always the last to know?

Nothing has changed, and nothing has been fixed. 

Debt that can be repaid might be. What cannot be repaid won't be. Not ever. And that's what depressions in real capitalist economies are for: quick, dirty and nasty little episodes of failure which reset the chess board. Except we can't seem to accept that because we're not really a capitalist society anymore, which is why this sorry tale keeps dragging on.