Juggling Dynamite

More Sturm und Drang from the US Fed today as they promise yet another “stimulus” rabbit out of an increasingly threadbare hat. The truth is that indefinite liquidity efforts are not helping the US economy because cash is already piled to the rafters in the financial system but not moving into the real economy. Consumers who have a choice do not want to take on more debt today, and those who are desperate for it, do not qualify as a worthwhile credit risk. Global demand has flat-lined. Tough gig being a banker “magician” these days, the crowds used to be so impressed with more leverage, now they just yawn and hurl insults.

Money velocity has rolled off the charts and under the chesterfield.

As shown in this clip, cash deposits are up 21% in US banks today while loan demand has grown by just 4%. Here is a direct link.

P.s. For those that missed it, the Fed today lowered its GDP growth forecasts (again) for the US to 1.7 to 1.8% for 2012, and 2.3 to 3% for 2013.  This would be the 54th time they have lowered their overly optimistic growth forecasts over the past 5 years.  It seems very likely they will be doing that again in the New Year.  Poor Ben will be mystified as to why this just keeps happening…

Even if a deal is ultimately reached on the fiscal cliff, Shilling says the U.S. economy will continue to grow slowly. “We’re only about halfway through” the usual decade-long deleveraging after a major financial crisis, he notes. Here is a direct link.

Want social benefits? Fund them. The secret of paying for benefit programs is to control costs and set aside regular, mathematically sufficient, designated contributions from present income for future payouts. If you cannot meet the funding requirements, the benefit promises have to be lowered. This issue is that simple. Here is a direct link.