How The Fed Unwittingly Confirmed A Recession And A Default Cycle Are Now Inevitable

Tyler Durden's picture




 

While everyone was focused on the "front end" of central bank announcements in the form of Draghi jawboning, Yellen hemming and Kuroda panicking, something more troubling took place on Monday afternoon on the "back end", when the FED released its latest quarterly senior loan officers survey.

What it showed was that in Q4, lending standards tightened for the second consecutive quarter.

This is problematic because as DB's Jim Reid writes, two consecutive quarters of tightening standards "has never happened before without it signalling an eventual move into recession and a notable default cycle. Once we have 2 such quarters lending standards don't net loosen again until the start of the next cycle."

If there is any silver lining, it is that as DB points out, so far the tightening of standards are still only mild, especially relative to recessionary levels. So although it does continue to feel like we're late cycle, it could still be a number of quarters for the full cycle to unravel.

In other words the countdown is on, not only for the Fed to admit policy error, which Bill Dudley hinted at yesterday, but also a countdown to the admission that the US is in a recession and the long overdue collapse in the world's most crowded (if only until recently) trade, being long the US Dollar.

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Thu, 02/04/2016 - 08:46 | 7138928 Bill of Rights
Bill of Rights's picture

We print, therefore we are.

Thu, 02/04/2016 - 08:52 | 7138936 Croesus
Croesus's picture

Well, I don't know about the rest of you, but I'm ready: 

 

 

Beer...check. 

Popcorn...check. 

Boating accident...check. 

 

 

Thu, 02/04/2016 - 08:52 | 7138945 philipat
philipat's picture

Jim Reid seems to be the only honest part of Douche Bank. Or is he just transitoning for the future?

Thu, 02/04/2016 - 08:54 | 7138952 Croesus
Croesus's picture

Maybe he reads ZH...

(From yesterday): 

http://www.zerohedge.com/news/2016-02-03/it-time-panic-about-deutsche-bank

Personally, I think "honest banker" is an oxymoron. 

Thu, 02/04/2016 - 08:57 | 7138962 philipat
philipat's picture

He's actually an economist but an "Honest Economist" also tends towrads the oxymoronic. Or moronic, actually..

Thu, 02/04/2016 - 08:58 | 7138968 Croesus
Croesus's picture

True, I stand corrected...

 

Thu, 02/04/2016 - 09:12 | 7138987 philipat
philipat's picture

Actually, no seriously now, Jim Reid does tend to write some fairly interesting/accurate/intelligent stuff, especially by Wall Street sell side's own appalling standards. My guess is he knows the gig is up at Douche and it's kind of a way of distributing his r theesume, if you get my drift...

Thu, 02/04/2016 - 09:14 | 7139022 Croesus
Croesus's picture

I'd definitely agree with that, but if I were in shoes, I'd be seriously questioning the viability of working in the industry at all, if DB tanks. 

Thu, 02/04/2016 - 09:24 | 7139032 philipat
philipat's picture

I do hope you are right. But I feel sorry for all the "Bailed-in" souls too stupid to see it all coming?

The "Edit" time limits are working like shit this evening? Couldn't correct the "Resume" stuff above even after just a few minutes. Real Fight Club stuff...quick now

Thu, 02/04/2016 - 09:35 | 7139084 Croesus
Croesus's picture

@ philipat: 

I feel sorry for them, up to a point; I have immediate family members like this: 

I've tried telling them, over and over again...they don't listen, because they either don't understand, or they don't want to hear it. 

 

Thu, 02/04/2016 - 09:45 | 7139115 philipat
philipat's picture

 Me too. They think that "The Government will protect us". As I said, I feel sorry for those too fucking stupid to see the light..

Thu, 02/04/2016 - 09:47 | 7139123 highandwired
highandwired's picture

Honestly, I sometimes envy them.  I never understood the notion of "ignorance being bliss" but now I do

Thu, 02/04/2016 - 09:55 | 7139158 El Oregonian
El Oregonian's picture

OH... Did I do that?

Thu, 02/04/2016 - 14:00 | 7140356 Uchtdorf
Uchtdorf's picture

----> Tell the truth and face the nail guns.

----> Hide the truth and face the pitchforks.

 

Bankers/economists have two choices

Thu, 02/04/2016 - 14:25 | 7140448 sopko16
sopko16's picture

Don't you guys pay taxes to USA inc? If so, then aren't you a part of any bail-ins? Just wondering.

Thu, 02/04/2016 - 11:54 | 7139785 geo_synch
geo_synch's picture

Well, the problem is that us Economists have a choice between "Honest" and "Employed".

Thu, 02/04/2016 - 13:29 | 7140229 KnuckleDragger-X
Thu, 02/04/2016 - 10:08 | 7139223 JRobby
JRobby's picture

They believed their own lies and let the debt supercycle continue at an insane rate

Thu, 02/04/2016 - 09:02 | 7138984 BandGap
BandGap's picture

For me I'll never be ready enough. But it's not my choice when the shitwave hits.

Ready as we'll ever be......wait, need more beer.

Thu, 02/04/2016 - 09:26 | 7139055 Whoa Dammit
Whoa Dammit's picture

I don't even care anymore. It's just more for them, less for us ad nauseum. 

Thu, 02/04/2016 - 09:38 | 7139091 XAU XAG
XAU XAG's picture

without it signalling an eventual move into recession 

 

 

 

Guess that's it then........................out of depression and into recession

 

Things are looking up Guy's and Girls.

 

 

 

 

 

 

 

SARC!

Thu, 02/04/2016 - 09:19 | 7139037 ArkansasAngie
ArkansasAngie's picture

Cleanest dirty shirt.

Invest in the EUR?  Yen?  Yuan?  

 

If the Fedsters decide to unlease NIRP they will be confirming that this is NOT just a mild recession.

 

 

 

Thu, 02/04/2016 - 09:31 | 7139072 Raging Debate
Raging Debate's picture

Invest? Nearly everything now is a ten year buy and hold. I dont like paper investments. Maybe in 2021 if nukes dont fly. 

Thu, 02/04/2016 - 10:02 | 7139192 LawsofPhysics
LawsofPhysics's picture

all according to plan.  They have access to a printer/computer and will happily buy all the remaining real assets are fire sale prices...

There is no way any of this gets "fixed" now without a serious refund or serious retribution.

Human nature being what it is, I think you know what happens next. 

Thu, 02/04/2016 - 10:43 | 7139417 funthea
funthea's picture

What tightening in lending standards? I just heard an ad on the radio advertizing the return to the infamous "Pay-Option-ARM". The instument that pushed the housing porn bubble into high gear.

Thu, 02/04/2016 - 08:51 | 7138939 onewayticket2
onewayticket2's picture

Long Helicopter fuel and nail guns

Thu, 02/04/2016 - 08:52 | 7138944 MFL8240
MFL8240's picture

This is not news, this was preplanned by these liars!

Thu, 02/04/2016 - 09:30 | 7139070 Wahooo
Wahooo's picture

Why would the squid sue the squid?

Thu, 02/04/2016 - 08:53 | 7138946 buzzsaw99
buzzsaw99's picture

here's hoping the squid gets fined and sued repeatedly, frequently, and in size.

Thu, 02/04/2016 - 08:54 | 7138951 lordbyroniv
lordbyroniv's picture

Peter Schiff IS right,...........AGAIN !!!

Thu, 02/04/2016 - 09:00 | 7138976 philipat
philipat's picture

But don't expect CNBS to acknowledge that?....

Thu, 02/04/2016 - 09:25 | 7139047 VinceFostersGhost
VinceFostersGhost's picture

 

 

10 years.....where has the time gone?

https://www.youtube.com/watch?v=sgRGBNekFIw

Thu, 02/04/2016 - 09:53 | 7139054 philipat
philipat's picture

Vince = Huma. Such a transformation...Cock to crock?

Thu, 02/04/2016 - 08:59 | 7138973 Cautiously Pess...
Cautiously Pessimistic's picture

Heck.... I won't even lend money to myself right now, and I know 'me' pretty well.

Thu, 02/04/2016 - 09:00 | 7138975 Paul John Smith
Paul John Smith's picture

The path to prosperity is clear!

ALL HAIL OBAMA!

Thu, 02/04/2016 - 09:09 | 7139003 No Half Measure
No Half Measure's picture

Funny we have not seen much of the village idiot until yesterday when he went to pray.  It has been nice not having to hear him.  He should take an 11 month vacation and do us all a favor.

Thu, 02/04/2016 - 09:09 | 7139005 philipat
philipat's picture

Fuck, I truly hope that this shit show all collapses whilst Obuttboy is still in office. It would be grossly unfair to his successor otherwise. Unless that is Hillary, of course, in which case I'm fine with that. At least she wouldn't be able to blame Bush...

Thu, 02/04/2016 - 09:31 | 7139074 __Usury__
__Usury__'s picture

it will just like in 2008/2009...........all by bankster design.........these fucks are 4 steps ahead of  current events ............ya see, the banks need more taxes and more debt to 'extend' the ponzi.........so I give u one guess who the potus will be..............BS

Thu, 02/04/2016 - 09:41 | 7139099 philipat
philipat's picture

BS, or BS??

Thu, 02/04/2016 - 09:51 | 7139142 __Usury__
__Usury__'s picture

exactly

Thu, 02/04/2016 - 09:58 | 7139166 Eyeroller
Eyeroller's picture

Fuck, I truly hope that this shit show all collapses whilst Obuttboy is still in office.

Which is why the Feral Reserve will give us moar QE and NIRP.  Whatever it takes in the short term to prop this pig of a 'market' up until their boy is safely out of office.

And what makes you think that if Shrillary get in she won't blame Bush/Republicans for the mess?

Thu, 02/04/2016 - 10:07 | 7139205 philipat
philipat's picture

Yes, I fear your are correct.

Butt, 8 years is a long time, no? But, yes the sheeple are stupid enough to actually believe that the problems all go back 8 years and $8 Trillion debt ago. Tragic, isn't it? Until the Cheesy Twirls run out in WalMart and Kardashian gets a Buut job??

Thu, 02/04/2016 - 11:01 | 7139500 Kefeer
Kefeer's picture

Then he becomes King Obama; do you really want that? Just a thought.  Or Queen Hillary - vomit.

Thu, 02/04/2016 - 10:59 | 7139489 Kefeer
Kefeer's picture

Are you prepared for death or have you even thought about it?  Do not deceive yourself into thinking that when you die; it is as though you never existed...that is futility, like grasping at the wind.  If you die and it were as though you never existed, then you came from nothing and end in nothing, which means everything between nothing and nothing is nothing; we are much more than that.

Thu, 02/04/2016 - 09:03 | 7138985 mygameon
mygameon's picture

Obama admin requires this publication be filed under fiction according to the Dewey decimal system.

Thu, 02/04/2016 - 09:12 | 7139013 mygameon
mygameon's picture

Correction: Obama thought police has re-categorized this to be placed in section 098 of the library.

Thu, 02/04/2016 - 09:29 | 7139061 Squid Viscous
Squid Viscous's picture

Is that where the memory hole is?

Thu, 02/04/2016 - 09:05 | 7138989 Montani Semper ...
Montani Semper Liberi's picture

Recessions are a thing of the past.

 We will not have another recession...ever! Our double-seasonally-adjusted  numbers are telling us this.

Thu, 02/04/2016 - 09:06 | 7138994 new game
new game's picture

the path to prosperity is lined with gold and silver, or at least holding your own. the gold market is forshadowing the future. the only asset class that has a chance of standing tall when all done and said, cept counterplays of shorting...

other logical outcome is moar qe and hammer milling paper gold once again for the umteenth time...

Thu, 02/04/2016 - 09:12 | 7139015 No Half Measure
No Half Measure's picture

Lead should do well after the SHTF.  That is where I have put my "metal money".

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