market ace

What the G8 Communiqué Didn’t Say

There are other little things the G-8 failed to mention, as they choked on their green shoots of recovery. SInce they dictate a "recovery" from their ivory towers they need to look down at the real world once in while to see how bad things really are.

The credit market shutdown actually gained tremendous momentum in the first quarter of 2009, in spite of governments pouring trillions into their economies, and although it's natural to expect some temporary stabilization from the government's massive interventions, in the first quarter, that does not equal a "recovery" only some "less worse" data When one looks at reality from the first quarter, it's impossible to imagine any scenario in which the crisis could be declared "over." and any talk of removing excess liquidity from the system is a joke.

Excluding public sector borrowing (by the Treasury, government agencies, states, and municipalities), private sector credit was reduced at a mindboggling pace of $1.85 trillion per year! So there is not just zero lending, there is giagantic debt reduction, which is good in the long run, but does not show any indication of a "recovery"

The ONLY major player still borrowing money in big amounts was the United States Treasury Department, sopping up $1,44 trillion of the credit available and leaving less than nothing for the private sector as a whole.

For U.S. households alone, the losses have been massive: $1.39 trillion in the third and fourth quarters of 2007, a gigantic $10.89 trillion in 2008 and $1.33 trillion in the first quarter of 2009. That's $13.87 trillion in all, by far the worst of all time. These losses and credit drains will have massive negative consequences for the econmy in 2009 and 2010 and probably far beyond..