The US Federal Reserve starts its meeting today. There is a lot of talk about the US Fed giving indications about their withdrawing of monetary stimulus that they had pumped in so far. How far would they indicate that through actions, rather than statements? Plausible. But, personally we do not believe that strenuous effort is actually necessary.
We provide two charts below to validate our views. They show clearly that despite the money being pumped in by the US Federal Reserve, not much is actually reaching the real economy. As we have pointed out in a previous post, it has led to asset inflation in the financial markets, not inflation in the actual goods and services in the real economy. The sharpness of the contraction of credit is indicative of the problems that the US economy continues to face. The contraction in credit probably means that the Fed will probably do nothing to rock the boat. More so, because there is probably nobody better than Ben Bernanke to understand what happened in the Great Depression.
The charts show bank credit in the USA from 1973 to 9th September 2009 (the latest statistics released by the Fed).
This chart provides a broad overview:
The Chart below show the contraction of credit in the past one year.
We provide two charts below to validate our views. They show clearly that despite the money being pumped in by the US Federal Reserve, not much is actually reaching the real economy. As we have pointed out in a previous post, it has led to asset inflation in the financial markets, not inflation in the actual goods and services in the real economy. The sharpness of the contraction of credit is indicative of the problems that the US economy continues to face. The contraction in credit probably means that the Fed will probably do nothing to rock the boat. More so, because there is probably nobody better than Ben Bernanke to understand what happened in the Great Depression.
The charts show bank credit in the USA from 1973 to 9th September 2009 (the latest statistics released by the Fed).
This chart provides a broad overview:
The Chart below show the contraction of credit in the past one year.
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