POLITICIANS AND TV BLABBER HEADS HAVE LIED TO YOU FOR YEARS ABOUT THE ECONOMY. SEE THE TRUTH.

In THE SECRETS OF AUTOMATED CLEARINGS, GDP AND THE ECONOMY. RECOVERY? WHEN?, I showed you how bank clearings of checkable deposits between two parties strongly correlates with GDP once you remove the effects of inflation. As you know GDP is the measures the economy.



To further show you there hasn't been any recovery, I give you these confirming charts.

Bank credit comprises about 71% of all banking activity as measured by assets bankers declare on their books. Consumer activity comprises 11.1% of all banking activity. Residential realty of both  closed-end residential loans and  bortgage-backed securities comprises 20.6% of all banking activity. Producer activity comprises 22.2% of all banking activity.

Bank credit to Producers consists of Commercial and industrial loans as well as     Commercial real estate loans. Bank credit to Consumers consists of  Consumer loans as well as Revolving home equity loans.




The consumer pictures do not look so good. Since hitting a peak at the end of Q1 2010, true consumer loans have fallen -29.4%, falling at a rate of -5.6% a year.




True Home equity line of credit (HELOC) loans peaked at the end of Q3 2008. Since then, HELOCs have fallen -58.9%, falling at a rate of -13.8% a year.



Combined, true bank credit to consumers peaked at the end of Q4 2007. Since the peak, bank credit to consumers has fallen -43.6%, falling at rate of -12%.



The producer pictures do not look much better. True commercial and industrial loans peaked at the end of Q3 2008. Since then, true commercial and industrial loans have fallen -44.9%, falling at a rate of -9.4% a year.



True commercial real estate loans peaked at the end of Q4 2007. Since then, true commercial real estate loans have fallen -51.8%, falling at a rate of -10.2% a year.




Combined, true bank credit to producers peaked at the end of Q3 2008. Since the peak, true bank credit to producers has fallen -49.6%, falling at rate of -10.8%.

If there is a glimmer of hope, that can be found in true commercial and industrial loans. Since Q4 2011, true commercial and industrial loans have grown 0.6%, growing at an annual rate of 0.2%.

We're living in the 21st century. Politicians need to stop lying about obvious reality. Central bankers and others need to acknowledge their hubris.

Politicians and central bankers don't know what they're doing and they never did. If they did, it wouldn't take six years to fix the economy.

It's quite eye-opening when at long last one grows up only to discover almost all adults mostly lie about everything and many adults are too stupid to know they repeat lies willingly for those who hold power over them.

Fictional-character Gregory House is right. Everybody lies.

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WHY ISN'T THE ECONOMY DRIVING ANYWHERE? THE CAPITAL ENGINE LACKS FUEL!

So I've been spreading foreboding of late, first with  IT'S LOOKING LIKE MORE RECESSION IN THE U.S.A. IN 2014 and then with S&P 500 MINI-MANIA HITS. 24% CORRECTION OR 42% CRASH UPCOMING?

And now I've had a look at where producers stand with their mixed-use capital and their circulating capital. Specifically, I've looked at commercial and industrial loans gotten from commercial banks and asset-backed commercial paper.

Those who understand financing of trade, businessmen tend to use loans to acquire property in capital retained through time subject to known loss. The known loss is known as depreciation and the name given to that kind of capital is fixed capital.

Businessmen tend to seek accomodation of property in credit receivables they hold against debtors. Such property put into negotiable instrument form is known as commercial paper. Businessmen use property in deposits, otherwise known as wealth, gained from having their commercial paper discounted by a banker, to pay expenses. In so doing, they transmute wealth into capital.

Here's the fixed capital picture.



It's hard to get a good idea of what this should look like over long time as the data set goes back only to 1985. That said, it appears that businessmen go through periods where they build up fixed capital to generate sales.


Here's the circulating capital picture.




And here is what fixed capital and circulating capital look like together.



It appears that true asset-backed commercial paper gives a good indicator ahead of what producers plan to do toward fixed capital acquisition.

Yet what is most troubling is what I call the Capital Engine ratio. Let's have a look.




Think of fixed capital as a car engine and circulating capital as the gasoline. Right now, there is $6.09 of fixed capital loans to $1 circulating capital. 

Before Q3 2007 peak credit, the Capital Engine ratio averaged $1.34:$1. Since the banking credit collapse and following crisis, the Capital Engine ratio averages to $3.22:$1. The Capital Engine ratio has grown a whopping 459% since peak credit.

In short, there isn't fuel, petrol, gasoline to power the engine beyond idling. 

What has caused this stall state? Why, Ben Bernanke, the former chairman of the Federal Reserve, the supposed expert on the Great Depression, is the man who decided to have an engine with little fuel. Death by billions and billions of cuts is what Bernanke believes is the way to handle a banking crisis and deflation after a massive inflation. 

Foolishly, while chairman, Bernanke's entire plan had been interest rate suppression. His successor, Janet Yellen agrees with Bernanke's approach.

When rates are kept low, capitalists seek return outside of the U.S.A. That further puts strain on bank deposits and thus further weakening bankers already weakened from crisis after inflation. 

The worst bit of the Greatest Depression engineered foolishly by Ben Bernanke has been to hurt wage earners. Had interest rates risen, wage earners those living on fixed incomes would have gained buying power. Their living standards 

Central bankers always should do the opposite of prolonging recession. They should accelerate the collapse. Rates should get put up. Bankers should stepped up acccomodation, discounting every bit of commercial paper presented. That is how keep work flowing.

Entrepreneur-adventurers should face the music for their wrong fixed capital structures.

The sooner one gets through hard times to the bottom the sooner revival can happen. In fact, law makers should craft law to require by law accelerated recessions.

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