Credit Bubble Hangover

Via Jeff Harding, here’s yet another look at the so-called Green Shoots, and the hangover from the biggest credit bubble in history:

  • Consumer prices fell 0.4% in February, the first time since 1955 (54 years).
  • Retail sales decreased 1.1% from February to March (seasonally adjusted); sales are off 10.7% from March 2008 (retail and food services decreased 9.4%).
  • The net worth of American households – the difference between assets and liabilities — was $51.5 trillion, down $11.2 trillion or nearly 18% from 2007.That sets Americans’ total wealth back to levels lower than 2004. It is the first decline in American household net worth since 2002.
  • Mortgage credit fell to $10.5 trillion, the first decline since the Fed started keeping track in the 1950s.
  • Americans’ homeowners’ equity as percentage of the value of their homes fell to 43% in 2008—lowest since before WWII.
  • Industrial production fell 1.5% in March from a month earlier; down 13% since the recession began in December 2007, worse than every recession since World War II.
  • National Federation of Independent Business Small Business Optimism Index for February was down 1.5 points to 82.6 (1986=100), the second lowest level in the 35-year history of the survey. This has significant implications for employment and loan demand.
  • According to RGE (Nouriel Roubini) many US banks are insolvent: overall banking capital before the crisis was $1.4 trillion but there are expected losses of $1.8 trillion. Losses from loans and securities generated by US financial institutions are estimated to have been $3.6 trillion at its peak.
  • Defaults on corporate bonds bought by U.S. life insurers may cost “substantially” more than losses on securities linked to subprime, Alt-A and commercial mortgages—further deflation.
  • According to the most recent data from the U.S. Department of Education, default rates for federally guaranteed student loans are expected to reach 6.9% for fiscal year 2007, and are climbing dramatically.
  • Credit cardholders had $962 billion in unpaid balances on general purpose and proprietary cards at the end of 2007, an 8.6 percent increase from the previous year. That figure is expected to climb to $1.2 trillion by the end of 2012, or $6,373 per cardholder.
  • Two-thirds of the $154.5 billion of securitized commercial real estate mortgages coming due between now and 2012 won’t qualify for refinancing; Deutsche Bank, Goldman, and others estimate declines in commercial-property values of 35% to 45% from the peak in 2007. They believe the commercial real-estate slump will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession.
  • Deflation continues worldwide: Japan, Germany, and China are all experiencing deflation.
  • U.S. unemployment is now at 8.5%.

Nice exercise in reality checking . . .


Green Shoots?
Jeff Harding
Daily Capitalist., April 22nd, 2009

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