Q3 2011 'Flow of Funds'

By: Doug Noland | Fri, Dec 9, 2011
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It is only appropriate that the release of the Fed's latest Credit data directs our analytical focus back to the U.S. Credit system and economy. For the quarter, total system Credit market debt increased to a record $53.825 TN. While some analysts continue to refer to "deleveraging," it is worth noting that total system debt remains at a staggering 355% of Gross Domestic Product (GDP). This is not meaningfully below the peak ratio of 375% in Q2 2009 (ended the nineties at 264%).

The third quarter was notable for U.S. economic resilience in the face of a tumultuous global financial backdrop. As always, Z.1 report data provide invaluable insight. Illustrating the effects of ongoing market stress, Domestic Financial Debt contracted at a seasonally-adjusted $499bn (down from Q2's SAAR $995bn) to $13.725 TN. Meanwhile, Non-Financial Sector Borrowings jumped SAAR $1.623 TN to a record $37.829 TN. This was the strongest debt expansion since Q4 2010'S $1.788 TN - and up from Q2's SAAR $1.144 TN and Q1's SAAR $862bn. It is also closer to the $2.0 TN (or so) annual growth that, as I have theorized, is required to reflate the (Credit Bubble) maladjusted U.S. financial and economic systems (including investment, jobs and incomes; home and asset prices; and business sector profits and household net worth).

In percentage terms, Non-Financial Debt (NFD) expanded at a 4.3% pace, up from Q2's 3.1% and Q1's 2.3% (NFD expanded 4.1% in 2010, 3.0% in '09, 6.0% in '08 and 8.5% in '07). This accelerating debt growth helps explain the generally favorable economic data and Q3's 2.0% GDP growth (up from Q2's 1.3% and Q1's 0.4%). Importantly, the vast majority of system debt growth continues to emanate from Washington. For the quarter, federal government borrowings jumped to SAAR $1.383 TN (up from Q2's SAAR $826bn and Q1's SAAR $742bn) to the strongest federal debt expansion since Q4 2010. In percentage terms, federal debt expanded at a 14.1% annualized rate in Q3, up from Q2's 8.6% and Q2's 7.9%. I would not expect the U.S. economy to falter significantly so long as the current trajectory of federal debt growth is maintained and the other funding markets do not badly malfunction.

Outstanding Treasury debt surpassed $10 TN during Q3 after exceeding $5 TN for the first time in 2007. In just 13 quarters, Treasury debt has increased $4.852 TN, or 92%, to $10.103 TN. After doubling mortgage debt in just about six years during the spectacular Mortgage/Wall Street Finance Bubble, the fateful Government Finance Bubble now ensures our system will double federal debt in less than four years.

Since the first half of 2008, outstanding Treasury debt has jumped from 16.2% of Total outstanding Non-Financial Debt to 26.7%. Total Federal Debt of $11.87 TN has increased from 46% of GDP to 78% of GDP in only 13 quarters. It is worth noting that Federal debt growth amounted 13.3% of total annual Non-Financial Debt growth back in 2007. It jumped to 71% in 2008, to 84% in 2009, and then to 113% in 2010. It will likely remain near 100% this year. No one should expect that an economy dominated to such an unprecedented degree by government finance to equate to positive economic performance or a sound economic structure. And beware of extrapolating apparent favorable economic metrics such as GDP and corporate earnings and cash-flows.

The massive expansion of government debt has thus far sustained the ongoing inflation of GDP and incomes (and consumption). Record Q3 annualized GDP of $15.181 TN was up 3.9% from Q3 2010. National Income was 3.8% ($493bn) higher y-o-y to a record $13.435 TN annualized. Total Compensation increased 2.8% from a year ago to a record $8.250 TN. Total Business borrowings increased 3.5% (SAAR $398bn) to $11.499 TN, down from Q2's 4.5% and Q1's 4.2%. Helping the economy at the margin, State and Local debt growth was flat during the quarter (at $3.014 TN), after posting atypical declines of 3.5% (SAAR $107bn) and 3.3% (SAAR $100bn) in the previous two quarters. In the largest contraction since 2008, Foreign U.S. borrowings declined at an 8.3% pace (SAAR $192bn) during the quarter.

Total Household debt contracted at a 1.2% rate during Q3 (to $13.208 TN), a slight acceleration from Q2's 0.6% rate of decline. Household Mortgage debt contracted at a 1.8% rate, while Consumer Credit expanded at a 1.2% pace.

Market tumult was apparent in the Security Broker/Dealers balance sheet. Assets contracted SAAR $555bn. Security Credit declined SAAR $244bn and Miscellaneous Asset dropped SAAR $209bn. On the Liability side, Repurchase Agreements (net) sank SAAR $849bn.

In light of global de-leveraging dynamics and the failure of MF Global, there has been increasing attention paid to the Repurchase Agreement ("repo") market. From the Z.1 we see that "Federal Funds and Repurchase Agreements" contracted a noteworthy SAAR $835bn during Q3 (largest declined since Q4 2008). Most of change was registered by the Broker/Dealers (noted above), although U.S. commercial Bank "repo" Liabilities contracted SAAR $360bn. Meanwhile, Foreign Banks operating in the U.S. increased "repo" Liabilities SAAR $196bn.

I have seen reference in writings to a $1.0 TN "repo" market. Unfortunately, I don't believe anyone has a handle on the size of this critical securities financing marketplace - whether at home or globally. The Fed's Z.1 tallies repo Liabilities of $1.062 TN, including $333bn at U.S. Commercial Banks, $266bn at U.S. Offices of Foreign Banks, $211bn at Real Estate Investment Trusts (REITs), and $174bn at the Broker/Dealers. The problem is that these are "Net" numbers, where "repo" Liabilities at, say, one securities firm would be offset by the "repo" Assets of another firm. "Net" provides us little information. To better gauge the functioning of this critical marketplace would require knowing the changes in gross "repo" Assets and Liabilities by category. But with this nebulous market being global - and perhaps purposely opaque, especially at the end of quarterly reporting periods - we are basically left without meaningful data.

In light of European bank stress and widely reported funding issues, I was curious to view the happenings at the category "Foreign Banking Offices in the U.S." Well, foreign banks increased holdings of U.S. Assets by SAAR $1.200 TN during Q3. Miscellaneous Assets jumped SAAR $550bn, Reserves at the Federal Reserve rose SAAR $340bn, Security Credit SAAR increased $200bn, and Corporate/Foreign Bonds gained SAAR $103bn. Analysis of the Liability side (to see how this notable growth in Assets was financed) does not reduce the murkiness. Other Miscellaneous Liabilities increased SAAR $917bn, Interbank Liabilities to Foreign Banks SAAR grew $643bn, and Fed Funds/Repo SAAR increased $196bn, offset by a SAAR $563bn decline in Large Times Deposits. Such big changes are indicative of market and funding tumult (sophisticated "money on the move"). The decline in Large Deposits is consistent with funding stress. The other changes are not easily explained. I assume the Fed accounts for unexplained changes and unreconcilable items in "Other."

The bottom line remains that the U.S economy continues to tread water, staying afloat by a historic expansion of federal debt. I have maintained that the explosion of federal debt was a Bubble, and that our fiscal train wreck would not be avoided through a resumption of private-sector debt growth. The U.S. Household sector does not want to add debt, and the corporate sector does not need to. I have as well noted the disturbing parallels between the eruption of subprime and the Greek debt crisis. From my perspective, at this point it is only a matter of time before the markets begin to impose discipline upon Washington.


For the Week:

The S&P500 gained 0.9% (down 0.2% y-t-d), and the Dow rose 1.4% (up 5.2%). The Morgan Stanley Cyclicals increased 0.3% (down 13.5%), and the Transports added 0.2% (down 2.9%). The Morgan Stanley Consumer index jumped 1.5% (down 0.8%), and the Utilities gained 0.9% (up 10.1%). The Banks were up 1.4% (down 25.1%), and the Broker/Dealers were 2.3% higher (down 29.0%). The S&P 400 Mid-Caps gained 0.5% (down 2.4%), and the small cap Russell 2000 jumped 1.4% (down 4.9%). The Nasdaq100 was up 0.7% (up 4.5%), and the Morgan Stanley High Tech index increased 0.5% (down 7.4%). The Semiconductors increased 0.3% (down 8.8%). The InteractiveWeek Internet index added 0.2% (down 6.5%). The Biotechs declined 1.7% (down 19%). With bullion down $35, the HUI gold index slipped 0.7% (down 2.1%).

One and three-month Treasury bill rates ended the week at about zero. Two-year government yields were down 2.5 bps to 0.22%. Five-year T-note yields ended the week down 2.5 bps to 0.88%. Ten-year yields increased 3 bps to 2.06%. Long bond yields rose 8 bps to 3.08%. Benchmark Fannie MBS yields were down 6 to 3.00%. The spread between 10-year Treasury yields and benchmark MBS yields narrowed 9 bps to 94 bps. Agency 10-yr debt spreads were down 4 bps to negative 5 bps. The implied yield on December 2012 eurodollar futures declined 7 bps to 0.655%. The two-year dollar swap spread declined 2 bps to 42.5 bps. The 10-year dollar swap spread fell 5 bps to 12.5 bps. Corporate bond spreads narrowed. An index of investment grade bond risk fell 4.5 to 122 bps. An index of junk bond risk dropped 13 bps to 694 bps.

Debt issuance picked up this week. Investment-grade issuance this week included Gilead Sciences $3.7bn, Bank of America $3.4bn, Ecolab $2.75bn, Hewlett-Packard $1.5bn, Wells Fargo $1.5bn, Noble Energy $1.0bn, Duke Energy $1.0bn, Florida Power & Light $600 million, Hana Bank $500 million, Viacom $400 million, Senior Housing Property Trust $300 million, and Vessel Management Services $115 million.

Junk bond funds enjoyed inflows of $1.9bn (from Lipper). Junk issuance included Idex $350 million, First Niagara $300 million, NPC International $190 million and Fidelity Management $150 million.

I saw no convertible debt issued.

International dollar bond issuers included Canadian Imperial Bank $2.0bn, International Bank of Reconstruction and Development $400 million and Aircastle $150 million.

Italian 10-yr yields ended the week down 33 bps to 6.33% (up 152bps y-t-d). Spain's 10-year yields gained 9 bps to 5.71% (up 27bps). Greek two-year yields ended the week up 11 bps to 109.54% (up 10,954bps). Greek 10-year yields surged another 380 bps to 32.29% (up 1,983bps). German bund yields added a basis point to 2.145% (down 82bps), while French yields were unchanged at 3.26% (spread to bunds little changed at 111bps). U.K. 10-year gilt yields dropped 13 bps to 2.16% (down 135bps). Ten-year Portuguese yields dropped 91 bps to 12.469% (up 589bps). Irish yields fell 34 bps to 8.52% (down 852bps).

The German DAX equities index fell 1.5% (down 13.4% y-t-d). Japanese 10-year "JGB" yields dropped 5 bps to 1.02% (down 10bps). Japan's Nikkei declined 1.2% (down 16.5%). Emerging markets were mixed. For the week, Brazil's Bovespa equities index increased 0.6% (down 16.0%), and Mexico's Bolsa gained 1.3% (down 3.4%). South Korea's Kospi index dropped 2.2% (down 8.6%). India's Sensex equities index sank 3.9% (down 20.9%). China's Shanghai Exchange fell 1.9% (down 17.6%). Brazil's benchmark dollar bond yields fell 14 bps to 3.25%.

Freddie Mac 30-year fixed mortgage rates slipped one basis point to 3.99% (down 62bps y-o-y). Fifteen-year fixed rates declined 3 bps to 3.27% (down 69bps y-o-y). One-year ARMs rose 2 bps to 2.80% (down 47bps y-o-y). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates up 5 bps to 4.70% (down 74bps y-o-y).

Federal Reserve Credit expanded $4.7bn to $2.798 TN. Fed Credit was up $390bn y-t-d and $446bn from a year ago, or 19%. Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 12/7) increased $3.7bn to $3.455 TN (12-wk decline of $20.2bn). "Custody holdings" were up $105bn y-t-d and $114bn from a year ago, or 3.4%.

Global central bank "international reserve assets" (excluding gold) - as tallied by Bloomberg - were up $1.253 TN y-o-y, or 17.4% to $10.277 TN. Over two years, reserves were $2.653 TN higher, for 35% growth.

M2 (narrow) "money" supply increased $3.4bn to $9.622 TN. "Narrow money" has expanded at a 9.7% pace y-t-d and 9.3% over the past year. For the week, Currency increased $1.1bn. Demand and Checkable Deposits jumped $14.4bn, while Savings Deposits dipped $5.3bn. Small Denominated Deposits declined $1.7bn. Retail Money Funds fell $5.1bn.

Total Money Fund assets jumped $25.3bn last week to a 21-wk high $2.678 TN. Money Fund assets were down $132bn y-t-d and $158bn over the past year, or 5.6%.

Total Commercial Paper outstanding declined $4.8bn (21-wk decline of $239bn) to $998bn. CP was up $26bn y-t-d, with a one-year decline of $11bn.

Global Credit Crisis Watch:

December 9 - Bloomberg (Simon Kennedy and James G. Neuger): "European leaders' blueprint for a closer fiscal union to save their single currency left the onus on central bankers to address investor concerns that Italy and Spain would succumb to the two-year-old financial crisis. While European Central Bank President Mario Draghi hailed the accord struck at all-night talks in Brussels, investors urged him to expand his crisis-fighting arsenal to ensure debt-addled nations can pay their bills... Nineteen months since euro leaders forged their first plan to contain the debt turmoil, the fifth comprehensive effort added 200 billion euros ($267 billion) to the warchest and tightened rules to curb future debts. They sped the start of a 500 billion-euro rescue fund to next year and diluted a demand that bondholders shoulder losses in rescues."

December 6 - Dow Jones: "The Eurosystem's balance sheet reached another record high in the week ending Dec. 2, as the central bank continued buying euro-zone government bonds and lending massive sums to cash-strapped banks. The balance sheet of the Eurosystem, which comprises the Frankfurt-based European Central Bank and the 17 euro-zone national central banks, grew by EUR16.14 billion compared with the previous week, settling at EUR2.436 trillion. This was EUR512 billion larger than a year earlier.

December 7 - Bloomberg (Tony Czuczka and Mark Deen): "Germany rejected comments by French Prime Minister Francois Fillon that Chancellor Angela Merkel agreed to drop demands on investors to accept losses in any sovereign default, saying that International Monetary Fund rules will ensure private-sector involvement. 'We only made it clear that the kind of PSI you had with Greece is an extreme case that won't be repeated,' Steffen Seibert, Merkel's chief spokesman, said... So-called collective action clauses "will stay, so the investors will only encounter risks in Europe that they already know from everywhere else in the world.'"

December 5 - Bloomberg (Lorenzo Totaro and Chiara Vasarri): "Prime Minister Mario Monti is asking Italians to swallow 30 billion euros ($40bn) in additional emergency economic measures even as the nation's fifth recession in the last decade looms next year... The premier has vowed 'shared sacrifices' as he seeks to cut the euro area's second-biggest debt and regain investor confidence..."

December 6 - Bloomberg (Emma Charlton): "Bonds from AAA rated Austria, the Netherlands and Finland are suffering as Europe's debt crisis increases volatility and erodes their haven status. Sixty-day volatility on 10-year government debt from the three nations reached euro-era records in November, as investors increased bets the currency bloc may unravel and as yields on Italian and Spanish securities surged. The countries were among 15 put on watch for a rating cut by Standard & Poor's..."

December 9 - Bloomberg (Kati Pohjanpalo): "Finland is ready to withdraw its support from Europe's permanent rescue mechanism if the Nordic country's condition of unanimous decision making is ignored, Finance Minister Jutta Urpilainen said. 'As we are strongly committed to unanimous decision making, in practice that means we have two options,' Urpilainen told reporters... 'Either we keep to the original agreement that decisions are taken unanimously on the permanent mechanism, or Finland doesn't participate in the permanent mechanism.'"

December 9 - Financial Times (Patrick Jenkins in London and Ralph Atkins): "Germany's banking system was shown to be far weaker than previously thought in a new round of European stress tests, raising the prospect of further taxpayer bail-outs. The European Banking Authority said... that German banks had a capital shortfall, which must be made up by next June, of €13.1bn - nearly triple the result of a previous test in October - pushing up the Europe-wide deficit from €106bn to €115bn."

December 9 - Bloomberg (David Whitehouse): "Moody's... cut ratings on Societe Generale SA, BNP Paribas SA and Credit Agricole SA, citing worsening liquidity and access to funding. The ratings service said in a statement that the probability that Societe Generale will get systemic support is very high."

December 6 - Bloomberg (Jeff St.Onge): "European real-estate deals may fall to the lowest level in a decade this quarter as the region's sovereign-debt crisis stifles lending for property acquisitions. 'In real estate, you have seen an almost complete shutdown in the debt markets,' Paul House, head of European real-estate investment banking at Citigroup Inc. said... 'The sovereign crisis is a banking crisis.' Sixty-five deals totaling $4.43 billion were announced in October and November... At that rate, transactions this quarter would be the lowest since 2000."

December 9 - Bloomberg (Radi Khasawneh and Alberto Fuertes): "The eight largest prime U.S. money- market mutual funds cut holdings in French banks by 68% in November, shifting investments to Swiss, Swedish, Canadian and Japanese banks. French bank holdings declined by $11.7 billion to $5.56 billion... The eight funds have reduced French bank debt by $76.8 billion in the past 12 months."

December 8 - Bloomberg (Sarah Mulholland): "A $19 billion wave of five-year commercial mortgages originated at the height of the property-market bubble starts maturing in less than a month, sparking concern that delinquencies will accelerate. About 43% of the $44 billion in loans packaged into bonds that come due next year were arranged in 2007 before property values tumbled 42%, according to Bank of America Corp. The largest deal ever, a $7.3 billion issue by Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc, has $586 million of loans maturing in 2012... Owners of everything from strip malls to Manhattan skyscrapers may find it harder to refinance after Europe's fiscal crisis sent relative yields on commercial-mortgage securities to the highest level since February 2010, roiled credit markets and forced a pullback in lending."

December 5 - Bloomberg (Kim Chipman and Alex Morales): "Global warming concerns are being pushed down the political agenda by the European debt crisis and U.S. economic slump, reducing the chance for an accord limiting climate change this week. 'The threat of worsening economic conditions is the ghostly figure at the window for everybody,' Edward Cameron of... World Resources Institute said..."

Global Bubble Watch:

December 7 - Financial Times (Daniel Schäfer and Robin Wigglesworth): "The volume of European private equity deals has dropped to its lowest level since the height of the financial crisis two years ago as buy-out groups struggle to finance deals amid the eurozone debt crisis. Europe's buy-out market has shrunk to $11.5bn in the current quarter to date, a mere fifth of the transaction volume seen in the fourth quarter of 2010 and the lowest level since the second quarter of 2009, according to data from Dealogic."

December 5 - Bloomberg (Sapna Maheshwari):"For all the concern that Europe's debt crisis is tightening credit, corporate bond sales worldwide have topped $3 trillion for the third year in a row and are less than 1% shy of 2010's pace.... In the U.S., sales of $1.08 trillion exceed last year's $1.07 trillion."

December 8 - Bloomberg (Krista Giovacco): "Many of the private-equity sponsors that saddled companies with more than $400 billion of loans for leveraged buyouts between 2006 and early 2008 failed to extract cash from those deals because the recession 'changed the game,' Moody's... said in a report. 'Given that the recession started within a year or two after many of these deals closed, there haven't been too many exits,' Lenny Ajzenman... analyst at Moody's and the report's lead author, said... Among the 40 companies in the Moody's sample, only 10 have either produced dividends for sponsors, had an IPO or been sold outright... The primary challenges have been weaker-than-expected earnings performance, difficult global economic conditions and 'choppy' capital markets..."

Currency Watch:

December 9 - Bloomberg (Manuel Baigorri and Richard Weiss): "Grupo Gowex, a Spanish provider of Wi-Fi wireless services, is moving funds to Germany because it expects Spain to exit the euro. German machinery maker GEA Group AG is setting maximum amounts held at any one bank. 'I don't trust Spain will remain in the euro zone,' said Jenaro Garcia, founder and chief executive officer of Madrid- based Grupo Gowex... 'We moved our cash and deposits to Germany because Spain will come back to the peseta.' European companies spent billions preparing for the euro when it was introduced in 2000 by 11 countries. Contingency planning for an unraveling of the currency involves cutting investment, moving money to Germany, transferring headquarters to northern Europe from southern, and even going out of business, according to interviews with more than 20 executives. The Bundesbank, Germany's central bank, registered capital inflows of 11.3 billion euros ($15 billion) from non-banks in September..."

The U.S. dollar index % to 7 (down % y-t-d). On the upside, the Norwegian krone increased 0.8%, the British pound 0.5%, the Mexican peso 0.5%, the Swedish krona 0.4%, the Japanese yen 0.4%, and the Canadian dollar 0.3%. On the downside, the South Korean won 1.4%, the South African rand 0.6%, the Singapore dollar 0.6%, the Brazilian real 0.4%, the New Zealand dollar 0.2%, the Taiwanese dollar 0.2%, and the Swiss franc 0.2%. The euro, Danish krone and Australian dollar were little changed on the week.

Commodities and Food Watch:

The CRB index declined 2.3% this week (down 7.9% y-t-d). The Goldman Sachs Commodities Index fell 1.7% (up 2.4%). Spot Gold lost 2.0% to $1,712 (up 21%). Silver declined 1.3% to $32.25 (up 4%). January Crude declined $1.55 to $99.41 (up 9%). January Gasoline fell 1.7% (up 2%), and January Natural Gas deflated 0.8% (down 25%). March Copper declined 0.8% (down 20%). December Wheat sank 6.3% (down 28%), and December Corn slipped 0.2% (down 7%).

China Bubble Watch:

December 5 - Bloomberg: "China can't use its $3.2 trillion in foreign exchange reserves to 'rescue' European nations and the country 'has done its part' to help the region deal with its financial crisis, Vice Foreign Minister Fu Ying said. 'Foreign reserves are not revenues,' Fu, whose portfolio is European affairs, said... 'It's not money that can be used by the premier or the finance minister.'"

December 7 - Financial Times (Rahul Jacob): "The Guangzhou government's land sales programme has seized up. Last month, the city government in southern China had to cancel or drastically scale back its plans to auction land four times because cash-strapped private developers were nervous about Beijing's raft of measures to cool property prices. 'The sale of 32 sites was cancelled within two weeks. There has never been a situation like this in the history of Guangzhou,' says Peng Peng, a local academic. In the first nine months of this year, the government collected just Rmb14bn ($2.2bn) in revenues from land sales versus a target for 2011 of Rmb50bn after Rmb45.5bn was raised in 2010."

Latin America Watch:

December 7 - Bloomberg (Alexander Ragir): "Brazil's growth stalled in the third quarter, a sign that the world's second-largest emerging economy lost momentum before the government announced stimulus to contain the spillover from Europe's debt crisis. Gross domestic product contracted 0.04% from the previous three months... As Europe's crisis deepens, President Dilma Rousseff's government is taking steps to reinvigorate the economy with a mix of tax cuts, interest rate reductions and looser bank lending requirements."

Unbalanced Global Economy Watch:

December 9 - Bloomberg (Scott Rose and Lyubov Pronina): "Russian anger over fraud allegations in last week's parliamentary election may swell a demonstration challenging the vote and Prime Minister Vladimir Putin's plan to return as president to the biggest in a decade. Organizers expect 20,000 people to congregate tomorrow in central Moscow... Putin said yesterday that the protesters had been emboldened after U.S. Secretary of State Hillary Clinton criticized the elections."

December 6 - Bloomberg (Nichola Saminather): "Australian properties listed for sale increased 17% in November from a year earlier, according to data from SQM Research Pty. Homes offered for sale climbed to 388,848 in November from 333,229 a year ago..."

December 6 - Bloomberg (Michael Heath): "Australia's central bank reduced its benchmark interest rate... for a second straight month as Europe's fiscal crisis threatens to slow the nation's commodity exports, sending its currency lower. Reserve Bank Governor Glenn Stevens and his board cut the overnight cash-rate target by a quarter percentage point to 4.25%, saying in a statement that 'financing conditions have become much more difficult, especially in Europe.'"

U.S Bubble Economy Watch:

December 6 - Bloomberg (Jonathan Tirone): "German Finance Minister Wolfgang Schaeuble said the U.S. model for solving the financial crisis would be 'very dangerous for Europe' and has resulted primarily in flooding emerging markets with excess liquidity."

Central Bank Watch:

December 5 - Bloomberg (Joshua Zumbrun): "Federal Reserve Bank of Chicago President Charles Evans said further monetary stimulus is needed now to help the U.S. economy escape from a 'liquidity trap.' 'There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape,' Evans said... 'It is imperative to undertake action now.'"

Muni Watch:

December 9 - Bloomberg (Christopher Palmeri and Michael B. Marois): "California bonds' three-year winning streak is poised to end as revenue in the lowest-rated U.S. state trails projections and debt sales resume after a nine- month moratorium. 'We're still the basket case of all the states,' Marilyn Cohen, founder of Envision Capital Management Inc., said... 'Our finances are the worst. Don't let the high returns blind you.'"



Doug Noland

Author: Doug Noland

Doug Noland
The Credit Bubble Bulletin

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