This page has been archived and commenting is disabled.
Piling up: The Detritus of Failed Stimulus Policies
Wolf Richter www.testosteronepit.com
“Ugly” doesn’t even describe it. I’m not talking about today’s ISM index of US Manufacturing, which was quite ugly, dropping to the worst level since 2009; and whose all-important New Orders sub-index was beyond ugly, plunging 12.3 percentage points, one of the worst dives in the history of the index. And I’m not talking about the JPMorgan Global Manufacturing PMI, which was truly ugly as it fell to its lowest level since June 2009. Those are volatile indices, and they might turn around on a dime, though that appears to be wishful thinking.
No, what “ugly” can't describe is their relationship to the worldwide explosion of government deficit spending and central bank money-printing operations, ballyhooed for years and with deafening intensity as a powerful stimulant to the economy. They did goose certain markets around the globe—though not all, for example equity markets in China or certain European countries. And they did prop up economies around the globe, but only briefly and unevenly, producing an ongoing four-year recession in Greece, mediocre results in the US, and stellar results in China and Germany.
Since the onset of the financial crisis, central banks have forced yields on high-quality debt, such as US Treasuries, to near zero—and often below the rate of inflation. And they have printed voluminously to buy assets that are now decomposing on their balance sheets: $18 trillion “and counting,” or “roughly 30% of global GDP,” is now weighing down these balance sheets, according the Bank for International Settlements. A huge monetary stimulus.
And fiscal stimulus—that is, deficit spending—around the globe took on mind-boggling proportions. At the very top is Japan, whose fiscal quagmire has no peers among developed nations: by March 2013, the end of the fiscal year, gross national debt will surpass $14 trillion, or 240% of GDP. Of its fiscal 2012 outlays, 56% will have to be borrowed. In the US, budget deficits have been ballooning for a decade, driving up gross national debt from $5.75 trillion in January 2000 to $8.68 trillion in December 2006, just before the financial crisis oozed to the surface. Then, all heck broke loose in Congress, and it opened the spigots all the way, and by December 2012, gross national debt will have nearly doubled to well over $16 trillion. It’s already over 100% of GDP. China also dumped stimulus on its economy, and so did Europe, despite the debt crisis festering on its margins, and despite “austerity” which continues to produce hefty deficits.
But now the party appears to be over. The economies have burned through these trillions and have misallocated or squandered them, and what’s left are mountains of public debt everywhere, a debt crisis in the Eurozone, and central banks with balance sheets that are stuffed with reeking assets they’d bought with the money they’d printed. I have previously written about the effects of the Fed’s policies on housing and the broad employment picture [read.... The Big Lie], but now, the JPMorgan Global Manufacturing PMI shows the combined economic impact of worldwide central bank operations and record government deficit spending on a big part of the real economy:
While the global PMI fell to 48.9 (below 50 indicates contraction), the lowest point since June 2009, and while Output fell to 49.3, it is the New Orders sub-index that took the biggest hit, plunging from 51.5 to 47.8—reflecting the historic nosedive of new orders in the ISM index of US Manufacturing. A cruel harbinger of things to come over the next few months.
The Eurozone was a key contributor to the decline. Even stalwart Germany is now heading south. But the debt crisis with its ups and downs and plot twists and happy endings that turn out to be the opening lines to the next installment has taken some of the focus off worldwide economic data as it’s being released country by country like Chinese water torture. But the global PMI confirms the relentless stream of disparate data: major economies around the world have been slowing, including the US, China, and Japan....
Despite the mind-boggling amounts of “stimulus” provided by governments and central banks alike! So the question arises, if this stimulus bought only such small amounts of growth for such a short time, on such an uneven basis, what will happen when the next slowdown cascades around the world—and stimulus as we’re now seeing, no longer works even in the short term?
Debt from that stimulus is greater than ever and growing daily, and central bank balance sheets are overflowing with muck. Any additional stimulus will only add to them. While it still might goose the markets briefly, its impact on the real economy appears to be negative over the longer term, and more of the same will accomplish nothing—other than leaving behind the mountainous detritus of failed policies.
Already, certain central bankers have come out of the closet admitting that their favorite shenanigans—ZIRP and QE—can’t solve the very problems they were designed to solve. What they’re not yet admitting massively, though some are starting to pass out hints, is just how much havoc these policies are wreaking. Read.... The Worldwide QE Quagmire.
And here is a hilarious video from down-under comedians Clarke & Dawe that sums up in 2½ minutes the true nature of Quantitative Easing.
And here is Chriss Street’s edgy and excellent..... Chief Justice Roberts Gutted Congressional Power and May Still Have Invalidated Obamacare.
»
- advertisements -
Could you provide one item of the US citizen cultural world over the last years that is worth dedicating time?
You made this one too easy. May I cite Styx' (is that apostrophe done correctly?) 'Come Sail Away'
http://www.youtube.com/watch?v=e5MAg_yWsq8
Buddy, you deserve some respect - there are some decent thoughts in whatever you are trying to pull off.
Riddle me this: what is your purpose for being here? My purpose is simple: to learn some things, have some fun, and remind new space monkeys now and then to buy physical. Maybe JP Morgan won't get crashed, but at least we will have something of value to pass on to our families.
Never heard of that stuff.
I wonder how easy it is. You just cast things with no comments.
Gonna watch it but hey, reads like a waste of human life time.
Your purpose? Must be driven by US citizenism.
Looking for a pack of lies to congregate around, making new buddies, finding a sense of matter in your group as the pack of lies must be defended.
Classical US citizen things. Useless to spell it.
That US citizen dimension is well known already.
What a pile of shit!
I had to go through a 22 second commercial and it takes as much to assess that it was such a pile of shit, simply existing to feed the massive consumption of resources plan as engineered by US citizens.
So that it is a waste of 44 seconds of human life, and a few more cents sacrificed to the great US citizen mangling machine.
Another life elevating experience as brought to you by US citizenism.
Thanks a dozen.
Consumed by hatred, you are a POS by choice. You want someone to blame? Look in a mirror. There is the loser responsible for all that you are, and all you will ever be.
You can change.
You know, for once I believe you are telling the truth!
Because if there is one thing a Chinese Citizenism citizen knows well, and is an expert on, it is a pile of shit.
.
...said AnAnonymous, admiring his latest roadside "art project".
I guess his Kung Fu was not better than yours! :)
"And they have printed voluminously to buy assets that are now decomposing on their balance sheets: $18 trillion “and counting."
I prefer to refer to it as a "Yucca Mountain" balance sheet. But once beyind the event horizon (i.e., within the Central Bank's balance sheet), it may be moot point, as long as the center holds. I guess that is the big question: will the center hold?
The Detritus of Failed Stimulus Policies
Women over 45 have the same problem.
But, with women its not their fault.
We need an immediate and massive redistribution of income and wealth to save the younger generations and prevent us all becoming like Japan.
Stimulus has failed because the recipients of stimulus FAILED TO STIMULATE. Simple, no? They gave the money to the wrong people! How hard is that to figure out, jeez.
But we have had two years of record high banker bonuses....so some are benefiting nicely from the 'stimulus.'
The Roaches are Fatter and Happier then ever.
Yep. The stimulus went to the billionaires. The billionaires just failed to stimulate the rest of us!
Yep. Just more 'trickle down' B.S. Why expect anything different from these criminals?
You need to reappraise your definition of quality Mr Richter. If US Treasuries were quality ie. as good as gold, they would fly own their own wings, not need the credit of the Federal Reserve Bank to prop them. US Treasuries, & Federal Reserve credit, are junk.
The real mystery is how & more pertinently, why, gold still bids for US Treasuries & Federal Reserve credit. But then it is a mania after all....
The Bundesbank reserves are 93% USD and JPY. Their gold is in the US, the UK, Paris and Switzerland, actual location undisclosed, the physicals certified annually. What can such a central bank do with these locked reserves other than circulate them in USD denominated instruments ?
don't hold back on cynicism Wolfy, the establishment are totally inept, totally corrupt and totally wrong ..they deserve every last drop
At first, I had “high-quality” in quotation marks, but then deleted them; I didn’t want to appear too cynical.
Chris Street's article is a gigantic turd. Oh yeah, it has turned the corner with the commerce clause! Oh, it has set the bill up for repeal under Article 1 section 7! Total BS. The Federal gov will keep rolling and the expansion into medical care will continue, Obama or Romney or whatever.