Deflation shock coming? Or QE Euphoria?


Taki Tsaklanos over at GoldSilverWorlds has reprinted a series of charts from Incrementum Lichtenstein that show a reversal in several big trends. Here are a couple of them, followed by some other supporting material.

First, US banks have not only failed to return to their pre-2008 pace of lending, but the loan growth rate is now falling back towards zero. In other words, the trillions of dollars pumped into the banking system by the Fed in recent years don’t seem to have worked:

Deflation shock (1)

Along the same lines, after the 2008 crash growth in the money supply spiked in the US and recovered modestly in Europe. But both trends are now declining:

Deflation shock (2)

To see what this means for the weakest links in the global finance chain, here’s a chart from Mike Shedlock showing how pretty much all the new credit being created in Spain is by the government, while private sector activity continues to contract.

Deflation shock (3)

In November, Spain’s youth unemployment rate exceeded that of Greece:

Spain saw its youth unemployment rate rise to a staggering 57.7% in November as the country registered the worse youth jobless rate in the eurozone area.

Eurostat, the statistical information arm of the European Union, also revealed the youth unemployment rate across the eurozone remained steady at 24.2% for the second consecutive month – meaning there were 3.5 million unemployed under-25s across the region.

“There is a real danger that these young people will get trapped in the ranks of the long-term unemployed,” James Howat, a European economist at Capital Economics, told IBTimes UK.

What does all this mean? Read more:


Article prepared by Marc Rosenberg

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