QE Is For The Banks, Nothing Else

Quantitative easing is for the banks and nothing else, despite the long-standing professorial deflections to the contrary by Ben Bernanke.

Oh, he can say it's to help housing recover, or employment, or whatever else happens to be languishing depending on the exigencies of the moment. But God forbid Ben should say what everyone ought to have understood from the beginning, that there's a huge pile of non-performing loans on the banks' books. Ben's various iterations of QE have kept him busy systematically transfering to the books of the Federal Reserve Bank of the United States significant tranches of those bad loans, and it won't be until those transfers end decisively that you can be sure that the banks are finally in the clear.

Meanwhile, have you considered that when Keynes said markets can stay irrational longer than you can remain solvent that Keynes never imagined how un-free markets were to become in the Western world? Five years out from the troubles of 2008, that the purchases of MBS continue apace should at once frighten everyone and galvanize support to reform the banking system and prioritize the commitment of its central bank to the integrity of the US dollar.

The voices warning us are out there. You just won't hear them on your television, which you should turn off at a minimum, and preferably execute loudly in your backyard with a shotgun, or drop on your driveway from a second story window. Please send film.

Consider this from Manuel Hinds, former finance minister of El Salvador and 2010 winner of the Hayek Prize, here:

"[H]igher interest rates would burst the bubbles in asset prices that monetary printing has created, bringing to the surface the losses that banks have accumulated by years of lending to unsustainable activities. Thus, the Fed is between a rock and a hard place. If it does not increase the rates of interest, excess demand will explode leading to high inflation, large current account deficits or both. If it increases interest rates, the activities that are profitable only with very low interest rates will collapse, including the equity and commodity markets. This would expose the banks to very large losses, which would trigger a serious crisis because the banks have accumulated bad assets for over a decade now and have cleansed them only partially because they trust that the government will save them without having to take painful write-offs. As a snowball going down a slope, the problem gets worse with time. ... The coming breakdown is likely to be much worse than that of 2008."

Or this from Joseph Calhoun of Alhambra Investment Partners, here, who doesn't consider that QE is so negative for present GDP growth because it is "financing" past growth now ensconced as bad debt:

"There are any number of reasons why QE might be negatively impacting growth, from high oil prices to the diversion of capital to speculative purposes to its effects through exchange rates on other countries with which we trade. I do not claim to know the full extent of the effects of QE but most importantly, neither does Ben Bernanke. That being the case and considering the evidence to date, why does Bernanke persist in pursuing the policy? Is there some other reason for the policy other than the stated one of spurring economic growth? If so, Bernanke sure isn't telling anyone what it is."

Or this from the ever-wise John Hussman, here:

"Meanwhile, with a monetary base of $3.27 trillion and an estimated duration of at least 7 years on present Fed holdings, the recent 100 basis point move in bond yields has created a loss of over $200 billion for the Fed. The Fed reports capital of only $55 billion on its consolidated balance sheet. but then, just like major banks, the Fed does not mark its assets to market. Most likely, the Fed is now technically insolvent. Moreover, the Fed is levered more than 59-to-1 even against its stated capital. The benefits of QE seem vastly overpriced and excessively trusted, particularly in an environment where the internal debate even within the Fed is becoming more pointed. Two members already want the Fed to taper in order “to prevent the potential negative consequences of the program from exceeding its anticipated benefits.” ... We don’t observe any material economic impact from quantitative easing, and continue to believe that the key event in the recent credit crisis was the FASB move to abandon the requirement for mark-to-market accounting among financial institutions (the Fed’s zero interest policy has merely allowed banks to recapitalize themselves on the backs of savers and the elderly on fixed incomes)."

QE is financial repression of the American taxpayer for the benefit of institutions which should be wound down and broken up. How long are you going to put up with it? Can you last another five years?

Do Nothing Congress Increases Revenue, Spends Less

So says Molly Ball, here:

But the ironic thing is that, by virtue of its very do-nothingness, the do-nothing Congress got a big thing done. First, in the fiscal-cliff deal struck around the new year, wealthy Americans’ income-tax rates went up, a policy change long sought by the president and his party. Then, in March, the budget ax known as sequestration fell, chopping $1 trillion from federal spending over the next decade—a cherished goal for fiscal conservatives. More revenue plus less spending equals a lower deficit. A much lower one. Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, estimates that these changes, combined with the domestic-spending caps imposed by the 2011 debt-ceiling deal (and counting savings on interest), will reduce the deficit by $3.99 trillion through 2023. That’s enough to stabilize the U.S. debt-to-GDP ratio, meaning that the debt will no longer be growing faster than the U.S. economy. In short, the deficit has been tamed.

--------------------------------------------------------------------------

She doesn't mention that both ideas were Obama's. Funny, Obama doesn't mention it either.

The Swiss Overwhelmingly Want To Be Home Owners But Aren't

And the famous Robert Shiller really doesn't care, here:

Consider Switzerland, which by several accounts has had one of the lowest rates of homeownership in the developed world. In 2010, only 36.8 percent of Swiss homes housed an owner-occupant; in the United States that same year, the rate was 66.5 percent. Yet Switzerland is doing just fine, with a gross domestic product that is 4 percent higher, per capita, than that of the United States, according to 2011 figures produced at the University of Pennsylvania. It’s not that the Swiss inherently prefer renting. A 1996 survey asked a sample of Swiss whether, if they could freely choose, they would rather be homeowners or renters. Eighty-three percent said homeowners.

---------------------------------------------------------------------------------

To hell with what people want, right? Just keep property values so high only the likes of David Niven, William F. Buckley, Jr. and Tina Turner can afford to own there.

Where GDP Goes To Die

Sleeper Story Of The Day: Q1 GDP Revised DOWN To 1.8% From 2.4%

While everyone was fixated on Supreme Court rulings involving homosexuality, the third and final report of GDP for Q1 2013 got buried in the avalanche. A good place for it, too, seeing how bad it was.

The BEA reported 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 1.8 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "third" estimate released by the Bureau of Economic Analysis.  In the fourth quarter, real GDP increased 0.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month.  In the second estimate, real GDP increased 2.4 percent.  With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was less than previously estimated, and exports and imports are now estimated to have declined (for more information, see "Revisions" on page 3).

-----------------------------------------------------------------------------------

Poor growth is entirely apropos to the situation. Preoccupied by our own narcissism, we aren't PRODUCING.

Unceremoniously Shown The Door, Maybe Bernanke Is Doing This On Purpose

The 10 Year Treasury falls off the cliff on Jun. 19

It is well known from almost every speech given by Ben Bernanke that he views Fed policy much more modestly than most of us do. A recent example was his address to the Economic Club of New York in November (pdf here) in which he said once again that Fed policy is only one part of what must be gotten right to ensure economic recovery. Both the Congress and the Executive must cooperate in his view to produce tax and spending policies which will not jeopardize the full faith and credit of the United States nor continue to grow the long term debt relative to GDP.

Having been unceremoniously shown the door by an ungrateful, ignorant and politically bellicose president on Monday, June 17th, it should come as no surprise that Bernanke reacted the way he did on Wednesday, June 19th, doubling down on the "taper talk" of May 22nd. No one in Congress nor The White House has taken Bernanke seriously about the urgency of the long term fiscal situation since the onset of the crisis, and if they are not going to take the bull by the horns despite his patience, Bernanke can well be understood to have given up, taken his accommodative ball and gone home.

I don't blame him one bit.

"It's not a recovery. It's not even normal growth. It's bad."

So says Edward Leamer, Director of the UCLA Anderson Forecast, here in The Los Angeles Times:

The country's tepid growth in its gross domestic product isn't creating enough good jobs to build a strong middle class, according to a UCLA report released Wednesday. ...

Real GDP growth — the value of goods and services produced after adjusting for inflation — is 15.4% below the 3% growth trend of past recoveries, wrote Edward Leamer . . ..

"It's not a recovery," he wrote. "It's not even normal growth. It's bad." ...

Young adults are facing staggering student loan debt that will force them to put off buying homes until later in life, said senior economist David Shulman.

Outstanding student loans have tripled since 2004, according to Federal Reserve Bank figures. In 2012, public and private student loan levels reached $966 billion.

"Never before have so many young people been saddled with so much non-mortgage debt, and that burden will keep them out of the home buying market for years to come," Shulman wrote.

GDP For Q1 2013 Revised Down To 2.4% From 2.5% In Second Estimate

From the report of the Bureau of Economic Analysis, 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 2.4 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "second" estimate released by the Bureau of Economic Analysis.  In the fourth quarter, real GDP increased 0.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month.  In the advance estimate, real GDP increased 2.5 percent.

To put the second estimate of Q1 2013 real GDP in context, a real rate of growth of 2.4% now is just slightly ahead of the average report of 2.23% during George W. Bush's first term in office. But compared to Barack Obama's first term, it's a world of difference from his performance in his first term with a paltry 0.83% average report.

That said, it used to be the opinion of Ben Bernanke, the Federal Reserve chairman, back in July 2009 that we needed 2.5% growth just to keep the jobless rate constant. That's why under Bush it took so long for jobs to recover after 911. And it's why jobs are taking so long to recover now. With growth of just 2.4%, going forward all we can expect is the current level of unemployment. And you can forget about putting the millions who lost their jobs in the recent financial panic back to work in decent jobs, maybe ever.

The 3-Month Treasury Yield Is An "Abomination"

So says John Hussman, here:

The 3-month Treasury yield now stands at a single basis point. Unwinding this abomination to restore even 2% Treasury bill rates implies a return to less than 10 cents of monetary base per dollar of nominal GDP. To do this without a balance sheet reduction would require 12 years of 6% nominal growth (which is fairly incompatible with sub-2% yields), a more extended limbo of stagnant economic growth like Japan, or significant inflation pressures – most likely in the back half of this decade. The alternative is to conduct the largest monetary tightening in the history of the world.

Normalization of yields to even 2% implies 50% balance sheet contraction [see his last graph].

-------------------------------------------------------------------------------------

The latter would mean a contraction of $1.55 trillion or so based on the current level, and that those securities would not mature on the balance sheet for their respective terms and come off naturally over time but quickly in a disorderly fashion, and therefore a bond market debacle is implied, and that to be defensive under this threat is to remain in cash, painful as that is.

America Remains In A Depression

So says James Rickards, here:

“We don’t have to worry about a recession — we are in a depression,” says James Rickards. “If you take the classic definition of a sustained, long-term downturn with economic growth below trend, then we are in the midst of a depression,” says the senior managing director of Tangent Capital and author of “Currency Wars.” Rickards doesn’t see Fed Chairman Ben Bernanke as having the solution to the economic malaise gripping the county.

Real GDP per capita through 1/1/11 bears this out (I think this gets updated through 1/1/12 this summer in the big annual GDP revision):

The peak to trough decline was 5.1% January 2007 to January 2009.

The metric remains 2.6% off peak.

Net Credit Market Debt Contraction In Two Sectors Is Repressing GDP

The domestic financial sector continues net negative in credit market debt outstanding, $3.27 trillion below the October 1, 2008 peak, as of October 2012.

And the household mortgage sector continues net negative in credit market debt outstanding, $1.22 trillion below the January 1, 2008 peak, as of October 2012.

These broken sectors for credit expansion have been large, important channels through which trillions in "money" has historically been created in the economy but no longer is, destroying GDP growth in the process. Until these channels are repaired, or replaced, total credit market debt outstanding will not double every 6-11.5 years as it has since the Second World War, and GDP will not recover to its historic 20th century levels.

TCMDO last doubled between 1999-2007

The level at which total credit market debt owed last doubled starting from 1949 was $49.8 trillion in July 2007. Five years later, in July 2012, the level was only $55.7 trillion when arguably it should have been already $74 trillion.

Something has gone horribly wrong with credit expansion in the United States, and the financial and housing sectors remain ground zero for the problem.

Real Federal Spending Growth Since 2000 Has Outstripped Real GDP 3 To 1

Your government in action

People who keep saying government should spend more to grow the economy more don't want to confront the fact that despite the growth in real federal outlays between fiscal 2000 and fiscal 2012, real GDP growth has lagged far behind by a ratio of 2.77 to 1.

Federal outlays in fiscal 2000 (in 2005 dollars) were $2.0406 trillion, and $3.2125 trillion in 2012, according to the Tax Policy Center, here. That's an increase in real spending of 57.4% over the period.

Contrast that with real GDP. On October 1, 2000 real GDP stood at $11.325 trillion. Twelve years later it was only $13.6654 trillion, an increase in real GDP of only 20.7% over the same years.

If federal spending counts just as much as private spending for GDP, it's not self-evident from these numbers that the higher rate of spending is doing anything to boost real GDP. Quite the opposite.

A more prudent way to look at would be to say that maybe all those federal expenditures in excess of the 20.7% of real economic growth were wasted, even destroyed, and that in fiscal 2012 real federal spending should have been $750 billion less than it was.

Meanwhile the bureaucrats scream bloody murder over a lousy $85 billion across the board spending cut for 2013.

Cutting off a drunk is never pretty.

On the other hand, he probably won't remember who last put a foot in his ass, either.

Big Deal: Debt To GDP Ratio Comes In At 105%

The debt as of 4/24/13 was $16.7943 trillion. GDP in the latest report was $16.0102 trillion. So the one divided by the other yields 1.05, or 105%. To which I say, Big deal.

In other words, the current annualized national income no longer is sufficient to cover what we owe. But there is no situation in which anyone stops consuming and simply works for a year to pay off everything one owes. At this you'd last maybe 40 days if you were Jesus Christ, but trust me, you aren't Jesus Christ. This is not the way to look at it. Instead, we should look at the debt like a mortgage.

Interest payments on this ever-growing debt in fiscal 2012 came to $360 billion, implying an interest rate paid of a little more than 2%. This rate is artificial. It is the result of manipulation afforded to us by the Federal Reserve's deliberate policy we affectionately call ZIRP, zero interest rate policy, which pushes long term interest rates down into the cellar. A more realistic rate would be double that, 4%, about a half point higher than current averages for 30-year mortgages (call it an extra penalty for having less than AAA status if you want). So, if one were to treat the total public debt outstanding like a mortgage amortized over 30 years at 4% fixed, our "mortgage" payment to pay off the debt would be $80.304 billion monthly, or about $964 billion a year. And you'd have to stop deficit spending.

In the current spending environment, $964 billion annually is about 25% of current government outlays of $3.8 trillion. Current government receipts, however, have lagged the outlays by about $1 trillion annually, so the "mortgage" payment would be closer to 35% of income.

Responsible persons all over this country pay off mortgages with that percentage of income devoted to debt service, and they do it all the time. It's high time the federal government started acting like them. In order to do so, however, current spending apart from the "mortgage" payment would have to be cut $1.96 trillion annually, or 48%, to $1.84 trillion annually for all programs. (That squealing you hear is the sound of stuck pigs).

Somebody get on this right away.     

Q1 2013 Real GDP First Estimate At 2.5%, Q4 2012 Remains At 0.4%

So reports the BEA 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 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.

Inflation-adjusted GDP under Obama continues to print in a narrow low range, averaging just 0.83% from 2009 through 2012, the worst on record in the post-war. With an average annual report of 2.04% under George Bush, economic growth was almost 2.5 times better under Bush than under Obama. GDP under Bush only seemed so bad because growth under Clinton's second term was so good at 4.5% per year.

In order to best George Bush's lacklustre record, Barack Obama is going to have to put up average real GDP numbers every year 2013 through 2016 of at least 3.5%.

At 2.5% in today's report, he's already off to a very slow start.

Louis Woodhill: Gold As Money Is Inevitably Deflationary In Terms Of Its Supply

So says Louis Woodhill for Forbes, here:

"The most fundamental issue that determines the workability of a gold standard is whether it attempts to use gold as money.  Any gold standard system where the size of the monetary base is determined by the physical supply of gold will eventually suffer a deflationary collapse.  The economic catastrophe that occurred in 1930 was inevitable, given the design of the gold standard system in use at the time. ...

"The use of gold as base money would quickly become the biggest single source of demand for gold, just as was the case during the years prior to the Great Depression.  Sooner or later, this new demand for gold would cause the real price of gold to start rising.  This would automatically cause the real value of the dollar to rise, precipitating a financial and economic crisis.

"Our highly leveraged financial system simply cannot tolerate monetary deflation.  During a financial crisis, everyone tries to become more liquid at the same time.  That is, everyone tries to increase their holdings of money, because the possession of money itself is the only thing that can guarantee that you will be able to pay your debts.

"If gold is money, and money is gold, this means that, once a liquidity crisis started, the demand for gold would increase.  This would drive up gold’s real value even farther, intensifying the crisis.  A destructive feedback loop would develop, leading to a complete meltdown of the financial system and the real economy.  This is exactly what happened in 1930."

It should be added that a monetarist system, by way of contrast, cannot tolerate credit deflation, but that is exactly what the United States is now facing with total credit market debt outstanding slowing to a crawl of $1.17 trillion added per year between 2007 and 2012. At the very slowest it should be growing at a rate of $4.33 trillion per year by historical measures, and at its fastest by $8.31 trillion per year.

The United States at present is in the throes of a deflationary collapse of monetarist making, not of dollar currency but of credit money, and it is the principal reason for the collapse of GDP. One of the largest sources of the "currency" of credit money in recent years has been mortgages, which are now effectively unacceptable as collateral because of the rot permeating the system in the form of defaults and underwaters.

Federal Reserve policy has actually been removing such collateral from circulation, along with US Treasuries, by placing it on its balance sheet. But since there is nothing "real" behind the dollars the Fed replaces this collateral with, there is no corresponding expansion of credit in size to match the former vigor of the process.

So perhaps the Fed should QE gold instead of MBS and Treasuries to provide something real behind the money created which would give that money a surer basis in collateral.

Central banks around the world have been buying gold in quantities not seen in 30 years in order to fill the collateral gap. The Fed should join them.

Russia Was Just The Excuse For The Eurogroup To Steal From Cyprus

So says Ambrose Evans-Pritchard, here, for the UK Telegraph:

"First they purloin the savings and bank deposits in Laiki and the Bank of Cyprus, including the working funds of the University of Cyprus, and thousands of small firms hanging on by their fingertips. Then they seize three quarters of the country’s gold reserves, making it ever harder for Cyprus to extricate itself from EMU at a later date. ...

"Cypriots are learning what it means to be a member of monetary union when things go badly wrong. The crisis costs have suddenly jumped from €17bn to €23bn, and the burden of finding an extra €6bn will fall on Cyprus alone. ...

"The workhouse treatment of Cyprus is nevertheless remarkable. The creditor powers walked away from their fresh pledges for an EMU banking union by whipping up largely bogus allegations of Russian money-laundering in Nicosia. A Council of Europe by a British prosecutor has failed to validate the claims. The EU authorities have gone to great lengths to insist that Cyprus is a 'special case', but I fail to see what is special about it. There is far more Russian money – laundered or otherwise – in the Netherlands. The banking centres of Ireland and Malta are just as large as a share of GDP. Luxembourg’s banking centre is at least four times more leveraged to the economy. ...

"The original plan in Cyprus – approved by the Eurogroup, but rejected by the Cypriot parliament – was to steal the money from any bank regardless of its health, and from small depositors regardless of the €100,000 guarantee. They have shown their character. The Eurogroup don’t give a damn about moral hazard. They are thieves."

Total Credit Money Creation Has Stalled Since 2007

Total credit money creation, aka total credit market debt outstanding (TCMDO), has stalled since 2007.

Doubling time for TCMDO has averaged 8.25 years between 1949 and 2007. The longest doubling times were 11.5 years from 1949 to 1961 and 10 years from 1989 to 1999. The shortest two episodes were each six years long: from 1977 to 1983, and from 1983 to 1989.

Real GDP over the longest periods increased 56% and 36% respectively. Over the shortest periods it increased 14% and 28% respectively.

Since 2007 TCMDO is expanding at a crawl, comparatively speaking, up at just 12% for the five years ended in July 2012. Real GDP for the period is a pathetic 3%.

At the current snail's pace, $1165 billion per year for the last five years, it will take until the year 2050 for TCMDO to double again.

Current quantitative easing programs continued indefinitely at the current rate of $1020 billion per year are as unlikely as previous iterations to lead to the expansion of TCMDO. The transfer mechanism is broken because the credit money creators, the banks, now prefer the option of investing elsewhere, which they did not have before 1999. The only way to fix that is to overturn Gramm-Leach-Bliley, and to reform mortgage lending. 

Credit money, the lifeblood of the nation, is not even reaching the veins, let alone flowing through them at a rate sufficient to generate any GDP heat.

Ben Bernanke Is Trying But Failing Miserably At Money Printing

And it's not exactly his fault.

Historically in the postwar period, the increase in Total Credit Market Debt Outstanding (TCMDO) has closely shadowed the increase in Total Net Worth, seemingly helping to finance it, until the late great recession when for the first time, and very briefly, net worth flagged below the level of the debt owed. (Ignoramuses in the Doomosphere everywhere cried "Insolvency" at the time, not understanding the meaning of the term "net"). Ex post facto, net worth has made a dramatic upswing while the debt owed has increased at a much reduced rate by historical standards. To quote a famous president, "That doesn't make any sense."

Despite all the debt naysayers out there, total credit market debt is not increasing at anything like it should be, and appears to be disconnected to a significant degree from the recent increase in total net worth, which is up 29% since its nadir at the beginning of 2009, or $14.7 trillion. For the whole five year period from July 2007 (the last time TCMDO doubled, going back to 1999) to July 2012, TCMDO increased at a rate of just 12% and real GDP increased just 2.9%, whereas TCMDO increased at a rate of 100% between 1949 and 2007 on average every 8.25 years. The shortest doubling times have included two periods of 6 years each, one of 6.75 years, one of 8 years, one of 9.5 years, one of 10 years, and one of 11.5 years. The very worst real GDP performance of all of those was for a 6 year doubling period when we got 14% real GDP, nearly 5 times better than we're getting now. All the rest posted real GDP of between 23% and 56%.

It is evident that Ben Bernanke's quantitative easing program (right scale) anticipated the leveling off of TCMDO (left scale). Clearly he expected the troubled banks to need a push to keep the credit money creation process going, but didn't understand how fruitless it would be. One notes that he has added about $2 trillion to the monetary base from the middle of the late great recession. By contrast, TCMDO is up (only!) $9 trillion from the beginning of 2007. By historical standards TCMDO should be up $25 trillion by now if TCMDO is to double again in ten years from 2007. And it should be up a lot more than even $25 trillion by now if it's to double sooner than ten years. At the average doubling time of 8.25 years, the $49.8 trillion of TCMDO in July 2007 should hit $99.684 trillion by October of 2015 if the postwar pattern is to continue. Instead, at the current rate of growth in TCMDO, it's going to take an unprecedented 27 years to double it, unless of course there are limits to borrowing to fuel growth, as many are beginning to tell us. In either event one can only assume there will be only pathetic real GDP growth going forward, if there is any at all.

Clearly something is horribly amiss in the transmission process of credit money creation for the first time in the postwar. Seemingly gargantuan quantities of money from the Fed through the process of quantitative easing should be seeding the banks who in turn should be creating massive amounts of credit way beyond the $9 trillion so far created. Instead, the banks are doing something else with it, by-passing the normal distribution channel. Some of the seed money is being held back to comply with increased capital requirements, to be sure, but more appears to be going directly into household net worth creation through investment gains from the stock market, enriching a very few bondholders, shareholders and banking industry players through the private trading desks of the banks, a unique development by historical standards made possible only since 1999 with the abolition of Glass-Steagall through the Gramm-Leach-Bliley Act. As an act of Congress, Ben Bernanke can't do much about that even if he is the most powerful man in the country.

In the absence of a creative policy change from the Fed whereby Congressional intent would be thwarted and money would actually reach the marketplace through a different avenue than the uncooperative banks, one must conclude that the Fed thinks it necessary to continue the various easing schemes because it judges the banks to be still too fragile to risk stopping them. That would be putting the best construction on the matter, to borrow a phrase from Luther's catechism. Either that, or the Fed itself has been completely captured by the bankers.

Big Whoop: Final Report Of Q4 2012 GDP Comes In At +0.4%

(click the images, as always, to enlarge)

The report from the Bureau of Economic Analysis is 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 0.4 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.

The pathetic performance is being hailed as good news. It is, like when the guy with the drill stops boring holes in your head, but only good relative to the first awful estimate.

This final revision is a huge revision up from the first estimate of -0.1% and the second of +0.1%. Suddenly growth in the 4th quarter is 4 times better than it was just a month ago. Yet even at that these are remarkable depths for US GDP to be in when the recession is supposed to be long over since 2009.

Speaking of which, it was said by Ben Bernanke back then, here in July 2009, that growth of 2.5% was necessary to keep the unemployment rate constant. So why is unemployment coming down? Even after today we still have growth roundable to zero in Q4, but the unemployment numbers magically came down anyway, from 8.1% last August to 7.7% in February 2013. If weak GDP is having a long term affect on unemployment, I don't see it. Even today's annual averages in the 1.8% and 2.2% range in the report for the last two years do not support Bernanke's assertion in 2009. Unemployment has come down despite such anemic growth rates. And if anything, we should have seen a gradual uptick in unemployment over the last two years because GDP has been insufficient to keep it constant. I don't think Bernanke really knows what he's talking about, and just makes this stuff up to mollify people at the time as he pursues his only real goal: keeping the banks afloat. Everything else is just for public consumption.

And you can put that in your Easter basket, and crack it. 

The Banks Rule America And Blaspheme Against Capitalism

In "Bankistan Vanquishes America" here Barry Ritholtz rages against the criminal enterprise under which we live, with a rash of supporting links. Under Clinton, Bush and Obama, its grip has only gotten tighter.

From the conclusion:

On the other side lay the bank apologists, corrupted politicians, and crony capitalists. They advocate the Big Lie of the financial crisis. They choose to ignore the facts and data that disprove their narrative. They continue to push the lies that the bailouts were a good investment. (They weren’t). They work against the Bipartisan consensus that the giant banks should be broken up. They ignore the many former bank CEOs who call for the break up of “Too Big to Fail” banks. They mandated that GSEs were banned from Lobbying, but they made sure that the big banks retained their influence peddling and hold on Washington DC.

They no longer represent the voters of their districts, but instead are the elected representatives of Bankistan.

And unless we do something — and soon — they will vanquish America.

Things haven't changed much since 1819 when the revolutionary paper of fictitious capital resulted in fraudulent bankruptcies on the backs of real capital, real property and commerce (think of today's zero interest rates returning nothing to retirees, collapse in the value of housing long purchased honestly, and moribund GDP and zero velocity money punishing millions with unemployment):

The enormous abuses of the banking system are not only prostrating our commerce, but producing revolution of property, which without more wisdom than we possess, will be much greater than were produced by the revolutionary paper. That too had the merit of purchasing our liberties, while the present trash has only furnished aliment to usurers and swindlers. The banks themselves were doing business on capitals, three fourths of which were fictitious: and, to extend their profit they furnished fictitious capital to every man, who having nothing and disliking the labours of the plough, chose rather to call himself a merchant to set up a house of 5000. D. a year expence, to dash into every species of mercantile gambling, and if that ended as gambling generally does, a fraudulent bankruptcy was an ultimate resource of retirement and competence. This fictitious capital probably of 100. millions of Dollars, is now to be lost, & to fall on some body; it must take on those who have property to meet it, & probably on the less cautious part, who, not aware of the impending catastrophe have suffered themselves to contract, or to be in debt, and must now sacrifice their property of a value many times the amount of their debt. We have been truly sowing the wind, and are now reaping the whirlwind. If the present crisis should end in the annihilation of these pennyless & ephemeral interlopers only, and reduce our commerce to the measure of our own wants and surplus productions, it will be a benefit in the end. But how to effect this, and give time to real capital, and the holders of real property, to back out of their entanglements by degrees requires more knolege of Political economy than we possess. I believe it might be done, but I despair of it’s being done. The eyes of our citizens are not yet sufficiently open to the true cause of our distresses. They ascribe them to every thing but their true cause, the banking system; a system, which, if it could do good in any form, is yet so certain of leading to abuse, as to be utterly incompatible with the public safety and prosperity. At present all is confusion, uncertainty and panic.

-- Thomas Jefferson