Crisis Redux: Another Summer Meltdown?
Road to Perdition
By Jim Willie
Financial Sense
Time to awaken to a new dreadful reality. Just like autumn 2008, all over again, the stock market is breaking down in a powerful visible manner, after nothing was fixed with the vast financial structures but much money was spent. If only the US Govt had decided to address the problems instead of funding the myriad liquidity facilities, which by the way serve as a virtual banking system. If only the US Govt had decided to address the problems instead of funding the US Federal Reserve equity reserves, as in excess bank reserve lures. If only the US Govt had decided to address the problems instead of funding the bank preferred stock and bank executive bonuses. If only the US Govt had decided to address the fundamental need for capital formation toward job growth instead of simple extensions of jobless benefits. If only the US Govt had decided to address the dire need to liquidate impaired assets instead of warehousing them, which happens by the way, to produce irreconcilable bank system constipation within the loan processing system. If only the US Govt had decided to address the cancerous large corporations too big to fail that must be permitted to die, instead of letting them seize greater power in US Govt and Wall Street functions. If only the US Govt had decided to address one of the root causes of US Economic deterioration, namely endless war, so that more funds would be available for that essential capital formation and job growth, not to mention state budget plugs, as the 50 states suffer from massive capital drain through taxation squandered at the federal level, a drain that includes war.
When no solutions are achieved, even no solutions pursued, the sugar high vanishes, the adrenalin rush wears off, and the underlying root causes return as the same symptoms to the sick patient. With no remedy, the symptoms turn much worse!! The symptoms return with a vengeance, like right here, right now. Shocks to the body economic are imminent, assured by lack of required credit for almost two years, compounded by the Gulf of Mexico poison event, sure to result in a killed exterminated appendage.
One of the most pernicious dirty secrets is that the supposedly excess bank reserves parked at the USFed are actually Loan Loss Reserves attracted by the USFed itself, by virtue of interest yield offered. Banks are running naked and insolvent and constipated, hardly a pretty image. The extraordinary measures have worn off, even as the political will to continue them has faded away. Reality has a way of returning to the scene, front & center. A rot has permeated the USEconomy. Personal bankruptcies are up 14% in the first half of 2010, hardly a sign of a recovery. Home sales are down. Foreclosures are unrelenting. Retail sales are down. Factory orders are down. California might look worse than Greece. About one million Americans have dropped out of the jobs market in the last two months. Eight million jobs have been lost in the recession that never actually ended. The rolls of people unemployed but not receiving a jobless insurance check amount to 9.2 million. The USFed has begun to eye the Printing Pre$ once again. Internal battles within the USFed center upon asset deflation and resumed bond monetization. The august body of hacks who occupy offices at the venerable US Federal Reserve Board is arguing in heated fashion about QE2, a Round #2 of powerful monetary printing, bond purchase, and financial market defecation, with predictably destructive capital formation effects toward which they remain blind.
Source: Financial Sense
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