Wednesday, August 10, 2011

Pictures Are Worth a Trillion Words

I could almost throw these at you without any explanation, but I will give the context, source, and some data details. (Please click on each image for a larger version.)

Inebriated consumers stopped partying and began some sober saving when the boom-town lights went out in 2008, according to this graph from the St. Louis Fed:


(Unfortunately, it looks like this process of deleveraging has hit a ceiling of some sort--not surprising, given that the economy has stagnated and people are struggling.)

Now for the banking sector. What about bank assets versus their liabilities? Rather than resolving and reducing troubled assets, banks still have an increasing assets portfolio (graph from the Federal Reserve):


What about the banks' investments? Here is a graph from the St. Louis Fed showing total commercial bank investments:


Of this total, much of the increase is in government securities (purportedly safe, but currently financing problematic US debt) (source):


Here is the corresponding diminishing quantity invested in "other securities" (source):


Some of these "other investments" are now held at the Fed. The Fed's assets have exploded with precarious instruments and government securities (source), to be unloaded when, to whom, and at whose expense no one really knows:


And here is a graph showing the market's evaluation of the value of the dollar versus Bernanke's "commodity," gold (source: Kitco):


Must I say more? I think not.

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Anonymous Heather said...

Such a great article which the Fed's assets have exploded with precarious instruments and government securities. In which much of the increase is in government securities.Thanks for sharing this article.

10:16 AM  

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