This cat has two white stripes and stinks

 

If you take the time to read the whole report, as I did, there was a remarkable disclosure in the latest JPMorgan earnings report: they are the largest TBTF “US” bank that historically has been known for making loans to the enslaved broader population...and they reported that in 2021/Q1 their total deposits rose by a staggering 24% year/year and up 6% from 2020/Q4, to $2.278 trillion, while the total amount of loans issued by the bank was virtually flat at $1.011 trillion, and down 4% from a year ago....they are taking in more money than thy are loaning out! For the 1^st time in their history, JPM had 100% more deposits than loans, the ratio of loans to deposits dropped below 50% for the 3^rd quarter in a row after plunging in the aftermath of the Covid-19 nasty pandemic:

v  An even more spectacular divergence between total deposits and loans, emerged at Bank of America where deposits similarly hit a new all-time high of $1.88 trillion, even as the bank's loans have continued to deteriorate at an alarming rate and are now at $911 billion, below the level during the great TBTF banker led financial crisis: in other words, there have been 12 years with basically zero loan growth at Bank of America! (so, where are the profits coming from?

The same trend exists at Citigroup... and Wells Fargo the data across the TBTF (4) banks shows something astonishing as there has been no loan growth since the global TBTF banker led great financial crisis, while total deposits have basically doubled! As such there are two major undertones we should draw from the collapsing loan-to-deposit ratio.

Ø  The first, one is that this ratio is a closely watched metric that measures how much lending a bank is doing when compared to its capacity to lend.

Ø  The second, is arguably the most fundamental question in modern fractional reserve banking: what comes first, loans or deposits, in other words do private, commercial banks create the money in circulation (by first lending it out) or is the central bankers responsible for money creation?

Interestingly there are now far more deposits than there are loans in the US banking system.

As you are all aware now knows, we live in a New MMT world where the “BS” FED and Treasury have merged and where one basically monetizes what the other has to sell. And since “Alice and the Mad-Hatter” have alluded to; the new world of MMT says that there is nothing to worry about from such debt monetization, even so-called cheerleading respected economists have been swept into this frenzy and illusion and are urging the US to issue as much debt as thy possibly can (with the placating Biden administration glad to accommodate). 

There is just one problem: the core tenet of MMT is no longer applicable. As a reminder, according to MMT loans create deposits not the other way around, and this massive crazy-ass socialist crackpot theory further claims that Reserve balances have nothing to do with this they are part of the banking system that ensures financial stability. Watch the following clip from one of the head Lonny Tune developers of MMT, Warrn Mosler who explains how so-called loans create deposits.

Only now when we look at the data that is not the case, as the empirical data mentioned above makes it plainly obvious that the core theory of MMT on which all its other pathetic staggered premises are built on a false foundation, with huge negative consequences. Starting with the collapse of Lehman-Brothers loan creation has been virtually non-existent (as total loans are now at close to the same levels seen at the time of Lehman's demise) while deposits have risen close to $10 trillion; a interesting development as it is here that the FED's massive excess reserves have gone the delta between the two is almost precisely the total amount of reserves injected by the FED since the Lehman-Brothers debacle-crisis.

 So, I suspect you are all waiting with baited breadth wondering what does all of this mean? In a nutshell, with the FED now slowing deposit formation, banks will have no choice but to issue loans to offset the lack of outside money injection by the FED. In other words, while bank deposits have already experienced the benefit of future inflation and have manifested it greatly in the stock market as the TBTF bankers reap trading profits, it is now the time of the matching asset to play catch up. This also means that while deposit growth (i.e., parked reserves at the FED collecting interest) in the future will slow to a trickle, banks will have no choice but to flood the country with trillions in loans, about a third of the currently outstanding loans, just to catch up to the head start provided by the FED!  Once banks launch this wholesale lending effort, it is then that the true destructive inflation from what the FED has done in the past decade will finally rear its ugly head. Right now, we have seen that excess deposits over loans is entirely driven by the trillions in reserves pumped into the coffers of their bastard sons, the TBTF bakers by the FED!  It also explains why even as the FED has pumped trillions of illusionary reserves into banks (that have parked the majority at the FED collecting interest), which have ended up as deposits on bank balance sheets (giving the illusion of profits), the velocity of M2 money has plunged to an all-time low (and will soon drop below the fractional reserve system singularity of 1.0x), as loan demand is nowhere near enough to offset the FED's forced deposit creation which incidentally ends up not in the economy but in the capital markets (stock market, commodities, and other assets), resulting in broad deflation offset by asset price hyperinflation.

 Another reason why this premise is critical: in a world where the dominant daily argument is whether the US is facing deflation or inflation, and where many so-called old-time real economists like myself have become convinced that we are facing a significant surge in higher prices. But don't take my word for it here is an excerpt from the latest "Flows and Liquidity" report from JPMorgan strategist Nick Panigirtzoglou in which he confirms all of my observations and writes that “a common feature of this week's US bank earnings reports has been the weakness in loan growth. Indeed, weekly data from the FED's H8 release shows that the pace of US bank lending remains in negative territory, exhibiting persistent weakness since last summer.”

He went on to state that the weakness “followed a temporary spike in bank lending during 2020/Q2, immediately after the virus crisis erupted, and is reminiscent of the US bank lending trajectory after the Lehman crisis. After a temporary spike immediately after the Lehman crisis, driven by companies and consumers tapping bank credit lines, the pace of US bank lending had remained largely in negative territory up until the middle of 2011. Although it entered positive territory after 2011, the pace of US bank lending had stayed significantly below pre -Lehman crisis levels, an important feature of the secular stagnation thesis."

A repeat of the post Lehman crisis period and the protracted weakness in bank lending would cast doubt to the idea of a sustained inflation impulse over the coming years. It would also act as a drag for money supply and liquidity creation going forward, reducing a key driver of asset prices.

We could likely infer further slowing in money creation over the coming years according to JPM, unless bank lending improves. JPMorgan's note concluded, “whether the protracted post Lehman period weakness in bank lending is repeated in the current post virus cycle will be critical in determining both the inflation and liquidity picture over the longer term. So far the trajectory for bank lending shows more similarities than differences to the post Lehman crisis period.”

 

Central Bankers, the FED working hard to enslave the working class and poor

The self-professed financial demi-god FED-Chief hypster Jerome Powell admitted this past week that our Federal Budget is very “Unsustainable” but incorrectly assumes that it is an easy fix later; through the past 6-months of our fiscal year 2021our punch-drunk spending-crazy government ran a record $1.7 trillion budget deficit. During an online seminar sponsored by the Economic Club of Washington DC, Powell stated this week that our economy can handle the current debt load {what is he smoking}. But he did warn that the long-term trajectory of the US budget is unsustainable.

He stated “The US federal budget is on an unsustainable path, meaning simply that our unfunded deficit/debt is growing meaningfully faster than the economy. And that is by definition unsustainable over time. It is a different thing to say the current level of the debt is unsustainable. It is not. The current level of debt is very sustainable. And there’s no question of our ability to service and issue that debt for the foreseeable future.”   However he failed to note that they only way to service that debt is to manipulate interest rates down to historical lows for many-many-many years out into the future “the facts are undigestible”!  Powell said the US government will eventually have to “get back to a sustainable path.” But he gave no timeframe!   “That is something that is best done in good times when the economy is at full employment and when taxes are rolling in. This is not the time to prioritize than concern. But it is nonetheless an important concern that we will ultimately have to return to again when the economy is strong.”

I have news for the Financial-Demi-God Newsflash this will never happen with him and his cronies screwing up our monetary policies.  If you remember my previous writing over the past 4-8 years our government was on a massive borrowing and spending spree [under the King-Trump and Obama administrations] long before the Covid-19 pandemic developed, and it will remain on this path as far as my old eyes can ere until their stupid path runs off the cliff like Wile Coyote.

It is extremely easy to just brush off the current government spending spree “due to the Covid-19 response.”. Virtually everybody being pranced about on the various financial networks [who reaped significant benefits from the massive fiscal stimulus, purely greed induced hype] agrees the stimulus was extremely necessary to deal with the economic negative economic impacts of the self-inflicted shutdown due to Covid-19. But if you had been reading my materials over the past 4+ years you would have noted that the King- Trump reckless spending administration was stimulating (massive bailouts) long before the Covid-19 crisis.  I found the King’s lies were a blatant massive Ponzi-scheme “purely a joke on the American people” as repeatedly during his campaign King-Trump promised that he would deal with the skyrocketing national debt and that only he could fix it he also stated repeatedly he could take care of it “fairly quickly and easily.”  And like all his incessant empty promises it never happened nor did he have any intensions of it happening. And he cannot blame the Covid-19 pandemic. AS due to ridiculous tax and spending policies the King-Trump administration ran huge deficits in the years preceding the outbreak. The budget deficit in the calendar year 2019 was over $1 trillion. And as you recall from my writing the King’s incessant public mantra “that the economy was booming because of the stock-market’s rise” . King Trump kept calling it “the greatest economy in the history of America” and as such would this not be the greatest time to tackle the ballooning deficit/debt budget problem? And let us never forget that “King-Trump’s main ass kisser” FED head Powell he was at King of the FED during this time.

So I ask the new $64,000 question, if the so called fiscally responsible Republicans weren’t willing to address the debt, does anybody actually think that the Placating Biden administration and his Democrat cronies will do it...if you think so, it is  time for you to check into a drug-rehab facility as you are high 😊 as after ramming through (he took lessons from the Mitch McConnell republican leader) a massive stimulus package, he is now looking to borrow (more deficit/debt) and spend on a massive “infrastructure” bill...despite their party affiliations politicians will always find a reason to borrow and spend money that they do not have or have any clue as to determine how to pay for their reckless spending.  

Please reflect upon and read a letter from our founding fathers as in a letter to James Madison, Thomas Jefferson asserted that we have no right to bind future generations to pay our debts. Politicians do the popular thing now to secure reelection tomorrow, with little concern for the long-term consequences. They hide the deteriorating economic house of cards behind government support programs. Powell is right when he says the federal budget is on an unsustainable path. But in my opinion, he is DEAD wrong to imply anything positive will ever be done about it.

 

 

Consumers are more financially strapped than thought!

 

Unfortunately, we saw that U.S. Consumer Debt rose again in February apparently, those redundant massive stimulus checks were not enough, a strange development. American consumers pulled felt the need to pull out their credit cards and ran up more massive balances in February and this surge in credit card spending should came as a surprise.

·         American consumers have piled up over $4.23 trillion in debt. This is slightly higher than the record $4.20 trillion in consumer debt as reported in February 2020 as the Covid-19 pandemic began to grip our nation.

According to the latest numbers from the Federal Reserve, consumer debt unexpectedly rose in February, and the trend is growing at an annual rate of 7.9%.  The $27.6 billion increase in consumer debt in February was the largest jump since November 2017. The FED consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt. The report showed that revolving debt, primarily reflecting credit card spending, jumped 10.1% in February. Americans now owe approximately $974.4 billion in credit card debt...what will be the next MMT bailout, forgiveness of this debt?  Credit card balances were over $1 trillion when the pandemic began. Many of the so called “CNBC” pundits take renewed consumer borrowing and spending as a sign the economy is almost fully recover. What a farce, as to me it appears that American “drunken-spending” consumers are running low on free-easy stimulus money. As a result, they are now having to spend money the old-fashioned way, they' “charge it” In other words, the sudden explosion in credit card spending are likely indicating real consumer stress.

 

This is exactly what the “BS” central bankers at the FED have stated that they want to see, more to see more borrowing and spending. FED Governor Lael Brainard spun the “strong” consumer credit / debit, numbers as good news (what a shame). She stated that we are seeing the kinds of financial conditions broadly that are very consistent with supporting the flow of credit to businesses and to households; I may have to go back to economics 101. As in my opinion building an economy (or economic data) on debt isn't smart or sustainable and this entire “BS” recovery is predicated on increased consumers spending toe massive amounts of stimulus which is just money borrowed (more and more taxpayer debt) and handed out by the federal government basically running up their own real-life debt-loads. When we dig into the numbers, they, unfortunately, reveal some disturbing trends that the FED-heads would prefer not to think about.

·         Loans valued at $2 trillion entered forbearance during the pandemic. 

·         As of the end of 2021/Q1, over 60 million Americans had skipped over $70 billion in debt payments that they owed. At some point, they will be forced to pay the bailout piper.

·         Meanwhile, almost 1-in-6 subprime auto loan borrowers are 60 days or more late on payments. That is the highest number on record.

·         There are also signs developing within the Hot housing market. Subprime mortgage delinquencies remain near record-high levels. And the full extent of the contagion is masked by massive forbearance programs.

·         In the stock investment world, margin lending has surged. As of late February, investors had borrowed a new record $814 billion against their portfolios, according to data from the Financial Industry Regulatory. Margin lending rose at the fastest annual rate since 2007 and it's up 49% from the previous highs last year.