Really Scary Fed Charts: March

In my posts Really Scary Fed Charts, Why Bernanke Will Furiously Cut and Fed CHANGES Really Scary Fed Charts, I posted some charts on the US banking system that can only be described as ‘really scary’.

Well, a new month brings new data. [EDIT: All data is sourced DIRECTLY from the Federal Reserve Bank of St. Louis.]

First the usual disclaimer: I am NOT a banking industry expert or an expert on fractional reserve banking. However, I did take my fair share of economics and finance courses and I’m definitely not retarded.

Obviously, things have deteriorated further.

Starting at the top and working my way down.
1) Total Borrowings are up from around $16 billion in December to $46 billion in February, almost a 200% increase.
2) Non-Borrowed Reserves dropped from around $25 billion in December to LESS than ZERO. I’m just going to throw this out there: That is probably NOT cool.
3) Net Free or Borrowed Reserves are around zero. While this may SEEM like an improvement, factoring the ever increasing TAF borrowings (which the Fed has removed from this data series) paints a more accurate picture. Including TAF credit, Net Free or Borrowed Reserves are approaching -$45 billion.
4) The Monetary Base has turned down. That is the monetary base is being eroded faster than it can be replaced as debt destruction continues to accelerate. The Fed is ‘injecting’ liquidity through REPO agreements. The Fed is NOT ‘printing’ money. Either way, debt destruction is exceeding liquidity injections. As I wrote in my first post:

“In the land of economics, debt and money are ‘fungible’. That simply means they are interchangeable and for all intents and purposes the same. Debt is money and money is debt. The sudden rapid destruction of debt (every write down you hear coming out of the financial sector) has the effect of destroying money. If debt is destroyed fast enough, and it will be, then you get a rather sudden contraction in money supply. This is known as DEFLATION… and it ALWAYS happens when a debt bubble bursts. ALWAYS.”

5) Despite lower rates, Household Financial Obligations (debt) as a percentage of Disposable Personal Income are still at historic highs. Can you say ‘crushing burden’?
6) The trend is not your friend. Personal Savings have been trending down for years now and have been ‘skipping’ around ZERO. A ZERO Personal Savings rate is NOT what you want to see on the eve of a GIANT financial CRISIS.

I probably don’t have to spell out to you what these charts mean for the global economy and your investments. Bottom callers in general will be come extinct. Those calling for specific bottoms, in financials and real estate for example, will become extinct first.

In US Banking System Teetering on the Brink of Collapse, Mike Whitney took my charts and analyzed them further.

“Some critics say that he just wanted to throw a lifeline to his fat-cat investor buddies on Wall Street by providing more liquidity for the markets. But that's not it, at all. The fact is, Bernanke had no choice. He's facing a challenge so huge and potentially catastrophic; that cutting rates must have seemed like the only option he had.”

We’ve had our Minsky Moment. Now go act accordingly.

Related Headlines:
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Auction Supply `Tsunami' Portends Municipal Losses (Update3)