Hows the economy doing?

[NJ5]

Some hard evidence of the continuing debt collapse and wealth loss:

http://www.moneyandmarkets.com/new-hard-evidence-of-continuing-debt-collapse-3-34207

Here are the facts:

• We witnessed one of the biggest collapses of all time in “open market paper” — mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion. (See line 2.)

   

• Banks lending went into the toilet. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans) at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time (line 7).

   

• Meanwhile, nonbank lenders (line 8) pulled out at the annual rate of $468 billion, also the worst on record.

   

• Mortgage lenders (line 9) pulled out for a third straight month. (Their worst on record was in the prior quarter.)

   

• And consumers (line 10) were shoved out of the market for credit at the annual pace of $90.7 billion, the worst on record.

   

• The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1,442.8 billion of the credit available — and leaving LESS than nothing for the private sector as a whole.

Bottom line: The first quarter brought the greatest credit collapse of all time.

For the long-term health of our country, less debt is not a bad thing. But for 2009 and the years ahead, it’s likely to be traumatic, delivering …

The Most Wealth Losses of All Time

Who is suffering the biggest and most pervasive losses? U.S. households and nonprofit organizations (page 105)!

The losses have been across the board — in real estate, stocks, mutual funds, family businesses, life insurance policies, and pension funds.

In U.S. households alone, the losses have been massive: $1.39 trillion in the third and fourth quarters of 2007 (not shown on page 105) … a gigantic $10.89 trillion in 2008 … $1.33 trillion in the first quarter of 2009 … $13.87 trillion in all, by far the worst of all time.

And these losses have equally massive consequences for 2009 and 2010:

• Deep cutbacks in consumer spending ahead, plus a virtual disappearance of conspicuous consumption …
• More massive sales declines at most of America’s giant manufacturers, retail firms, transportation companies, restaurants, and more, plus …
• Big losses replacing profits at most U.S. corporations!

Can Mr. Bernanke take even MORE radical steps? Can he trek where no other modern-day central banker has ever gone before?

Not without shooting himself in the foot! It still won’t be enough to avert a continuation of the debt crisis. Indeed, all it can accomplish is to kindle inflation fears, drive interest rates even higher, and actually sabotage any revival in the credit markets.

Look. The nearly $14 trillion in financial losses suffered by U.S. households has inevitable consequences. And massive, nonstop borrowings by the U.S. Treasury in the months ahead — driving interest rates still higher — can only make them worse.

My urgent warning: If you fall for Wall Street’s siren song that “the crisis is over,” you could be in for a fatal surprise.