While US equity prices push ebulliently towards their next level of Nirvana, financial conditions continue to tighten for American businesses. For the first time since April 2009, 3-month LIBOR - one of the most important reference rates for business financing - topped 1.00% today.
Here there is your recovery: the wealthy have never been wealthier, while half of America, some 50% of households, now own just 1% of the country's wealth, down from 3% in 1989, while America's poor have never been more in debt.
American net worth just hit a record high $88 trillion, a number taken by the fawning media is evidence of how successful Obama's policies have been. However, when one looks beneath the surface, a "devastating" picture emerges: US inequality like no one has seen it before.
while blowing out unsecured funding rates may no longer be a flashing red flag, a question has emerged as a lot of debt references Libor, debt ranging from household debt to non-financial business debt: some $28 trillion of it, to be specific, and just in the US. The question is just how concerned will the borrowers of said debt be once they get their next due balance.
Needless to say, the above outlandish graph does not capture capitalism at work. Nor did the speculators who surfed upon this $45 trillion bubble harvest their monumental windfalls owing to investment genius. Instead, it is the perverted fruit of Bubble Finance, and there is no better illustration of this bubble surfer syndrome than the sainted Warren Buffett.
The Fed's latest Senior Loan Officer Survey for July 2016 showed that banks continued to tighten standards on commercial loans in 2016 for both commercial and industrial (C&I) and commercial real estate (CRE). This was the fourth straight quarter of tighter standards: something that has never happened outside of a recession.
"There has been much discussion about the growth in wealth inequality over the past three decades. Given the importance of student debt in explaining negative household wealth, it is likely that the steady growth in student debt and borrowing, combined with the very slow rate of student loan repayment we have documented elsewhere, has materially contributed and will continue to contribute to negative household wealth and wealth inequality"
With Saudi Riyal forwards plunging back above 3.81, dramatically weaker than the current peg, Bloomberg reports that Saudi authorities are cracking down on currency traders as speculation mounts that the world’s biggest oil exporter won’t be able to maintain the riyal’s peg to the dollar as revenue plunges. The Saudis face two very tough choices...
For a country that prides itself (or used to at least) on the success of the entrepreneur and small business creation, a disturbing trend has developed. According to according to a new analysis by the Economic Innovation Group, fewer new businesses were created in the last five years than any other period since at least 1980..."It's hard to put into scale the collapse of new business formation. We have no precedent for that rapid and steep of a decline. It will have a ripple effect in the economy."
The Fed’s crusade to pump-up inflation toward its 2.00% target by hammering-down interest rates to the so-called zero bound is economically lethal. The former destroys the purchasing power of main street wages while the latter strip mines capital from business and channels it into Wall Street financial engineering and the inflation of stock prices.
The global financial system is in the eye of an unprecedented hurricane. While central bankers are congratulating themselves on their god-like mastery of Nature, and secretly praying to the idols of the Keynesian Cargo Cult every night, the inevitable consequence of borrowing from the future, the obsession with "growth" at any cost and financialization /monetary stimulus, a.k.a. the rich get richer thanks to central banksis systemic collapse.