Solarbird (solarbird) wrote,

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thursday and friday were interesting

Good morning! Sorry I haven't been posting lately; it's been very busy here, but not in economics. And most of what's been going on has been minimally interesting, anyway. Also, my arms have been acting up again. Such is life.

But I do want to clear out my many, many browser tabs of items worth noting. And more, I want to point out results from last Thursday's bond auction. Take a look at this intraday rate chart (screencap courtesy tf:asimov):

Click image to enlarge

Note how Thursday's T-bill demand dropped sharply and rates spiked higher at the end of the day. These rates are what the US government pays to borrow money. The less demand there is for T-bills, the higher rates climb. What these charts imply is that towards the end of the day, demand had been low enough that to sell out the issuance, the government had to move to rates that are, on an intraday basis, quite a bit higher. If you're a bond-market watcher, and you should be, this is interesting. The establishment is starting to admit it has taken note; see Worries Rise on the Size of U.S. Debt in The New York Times. The Federal Reserve bought US$3.51B in treasuries today to attempt to roll back T-bill rate climbs.

The budget deficit this year is now projected to reach an obscene US$1.8T on collapsing tax revenues.

And remember the M1 and the M1 money multiplier? I talked extensively about the money multiplier a few months ago. Note St. Louis Fed data indicating new lows.

Now, to everything else:

Sorry, couldn't resist. ^_^ But seriously; Friday's unemployment report included more than its fair share of goosing, with a reported 539,000 jobs lost, seasonally-adjusted. But the BLS played its usual shenanigans with the report, adding a staggering 226,000 non-seasonally adjusted jobs to the report with its black-box birth/death model. (Note: NONSEASONAL. You can't just add 226,000 back to 539,000, as tempting as that is.) Regardless, this is a very large number, the largest add in at least a year (which is how far back the chart in front of me goes) and implies robust business growth in April. I don't see it. In fact, throughout this recession, the birth/death model has only subtracted jobs once, last January. The U-6 line - broad un- and under-employment edged up to 15.8%. Given the number of adjustments from black-box models in this report, I am not assured that we can reasonably assert that the rate of job losses has actually moderated.

Also, check this graph, comparing job losses in this recession to other modern (post-1970) recessions. Neat, huh? '74-'76 and '81-'83 were bad, too.

There's predictable fallout from this in banking, Most US banks expect loan losses to get worse, not better, this year, and banks are continuing to tighten lending requirements, sometimes to and beyond the point of stupidity, with carte blanche denials independent of actual ability to pay. This has included a spectacular - record - drop in US consumer credit, US$-11.1B.

Fannie Mae, one of the two government-owned housing lending warehousers and between them and Freddie Mac, responsible for most mortgages, see housing price declines of 7-12% in 2009, and 2009 credit losses being worse than 2008. Karl at Market Ticker also points out that the bank "stress test" assumed losses on "prime" mortgage loans would be in the 3%-4% range, and Fannie Mae is already seeing 3.15%. And sure, they got handed a bunch of garbage thanks to government intervention, but they also own a massive stock of pre-bubble loans, which should buffer against that - how much, I don't know.

Back on the "stress tests," The Wall Street Journal reported over the weekend that the banks being tested didn't like the numbers that came out even under those conditions, and got the resulting capital add requirements sharply cut. Karl has much more on this topic, here. Senator Durbin's recent commentary that the banking system owns the US Congress should be expanded. Dr. Roubini also has very negative things to say about the credibility of the stress test regime, and states that the banking system bailout system is in trouble and may fail, returning to a more bearish stance.

China is seeing price deflation, on both an annual and month-to-month basis. Mish points out that they're also seeing monetary deflation. The Telegraph reports that local government officials in China have been ordered to smoke more, to boost local tobacco producers. China is also making significantly less money on its US bond (mostly t-bill) holdings. There are reports from less-than-reliable sources that China is moving quietly to allow the Yuan to be used broadly for international trade.

California sales tax revenues in April were down 50.9% from last year. Read that again: down more than half. That means sales counted in dollars (excepting food and medicines) were also down more than half. Income taxes are down 43%.

United Kingdom wages are falling at the fastest rate in 60 years. Wages are also falling broadly in the United States.

Todd Harrison at Minyanville thinks that we're looking at a "W"-shaped recession, and that we're about at the middle peak. But Calculated Risk sees some actual hope in Q1 GDP numbers. As always, we'll find out. Good luck.
Tags: economics
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