Economic Charts

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Sunday, May 1, 2011

Weekly King World News Interviews

This week Eric King of KingWorldNews interviews Bill Fleckenstein, Chris Whalen, Jim Rickards and Rick Santelli.  A host of topics are discussed this week, but mostly centered around the FEDs speach this week and what it means to the economy and QE.  This information is critical to aid in decision making defensive decisions in the market place.

Bill Fleckenstein - Discusses the amount of money going into the economy from the government and the value of the dollar due to FED debasement.  Bill thinks that the dollar is still over owned with considerable risks from the FED's devaluation.  Bill believes that the root of our issues is the money printing done by the FED which is leading to a massive debt in our country, which is slowly causing us to lose reserve status slowly over time.  Bill says we are going to have a raging inflation problem down the road due to the non-stop money printing.  He believes silver has a chance of really having a big move and that when silver goes over $50 it could take off as their is no ceiling defined prior.  

Chris Whalen - Discusses how the FED is lost in policy guidance.  He makes that point that if we don't let interest rates rise we are going to have a big problem with the banks soon, because they are not making any money.  He mentions how the housing price index is down 8 months in a row and nobody wants to have that discussion.  He says he is getting ready to downgrade the whole sector due to these issues.  Chris says that the suppression of interest rates has not really helped housing or the home owner, which is putting a negative impact on the economy.  Chris thinks that the dollar would be much lower right now if we weren't a reserve currency and sees that over time the dollar is going down further.  He thinks we need not a better fiscal policy to help the economy and mentions until we prove to the world we have one and follow it, we won't be able to turn the dollars decline around.  Chris says that if the FED stops QE then we will have a lot of problems.  Listen to the entire interview for deeper insights.

Jim Rickards - Discusses how the FED is using its tools to get real GDP inline, but they can't control M1 due to lack of borrows and a lack of lending on the banks side as well.  He also discusses the psychological factors adding headwinds against FED velocity, as velocity is declining due to people not feeling good about jobs, spending and such.  Jim mentions that the stock market participation is actually very low (as well as volume) and mainly HFT (high frequency trading) is running the markets.  He says if the FED gets into negative interest rates, that could stimulate borrowing, spending and such.  He mentions that we should watch the TIPS spread if it widens then the FED is meeting his goal, but if it doesn't then he will keep rates close to zero.  Jim also says that the end of QE2 will actually occur, but the FED has a reinvestment effect (maturing assets) going back into treasuries which blurs the lines.  China wants to reduce their 1/3rd of their reserves (1 Trillion) out of the dollar, but Jim points out that is not going to be all at once and will be done in different ways.  Listen to the entire interview for more information on the economy and the dollar which is critical to understand.

Rick Santelli - Discusses the destructiveness of the FED and how the printing towards inflation which is impacting the average family in discretionary spending due to the price at the pump and food.  He also mentions how these artificially low rates are impacting retirees as they are supposed to stay with conservative investments with zero interest rates.  Rick says that as we back off some of these spending programs GDP is getting impacted (as witnessed by the last years history and recent GDP).  The policy is not creating lasting positive effects in the economy.  Eric points out that about 8 to 9 dollars of spending equals 1 dollar of GDP currently which is really having a negative effect on the country.  Rick says until we see Fiscal policy right we will continue to see the same dynamics going on now.  Rick thinks that the FED actually acknowledged this week that the inflation play is actually not working for jobs and the economy.  Rick believes that interest rates will eventually go up in a few years, but right now the economic headwinds will keep them down.  Listen to the entire interview for more in-depth information from Rick. 

Weekly Unofficial Problem Bank List

CalculatedRisk has released its latest "Unofficial Problem Bank List" that increased to 984 institutions.  There were 6 removals from the list (including the 5 bank failures from the FDIC failed bank list) and 14 additions to the problem list with assets of $422.1 billion dollars.  To read more specifics please click here.


Weekly M1 and M2 Money Supply

This week M1 money supply (which includes currency, checks, demand deposits and other checkable deposits) saw an increase of 0.25%.  M2 money supply (which includes M1 plus retail Money Market Mutual Funds, savings and small time deposits) saw an increase of 0.14%.  Year over Year M1 increased 9.83% and M2 increased 4.82%.  

Weekly FDIC Bank Failures

This week the FDIC had 5 bank failures bringing the total number of banks failed to 39 institutions.  This past week we lost Community Central Bank in Mount Clemens Michigan, The Park Avenue Bank in Valdosta Georgia, First Choice Community Bank in Dallas Georgia, Cortez Community Bank in Brooksville Florida and First National Bank of Central Florida in Winter Park Florida.  The past 2 weeks have shown an acceleration in the number of lost banks.  We'll have to see if this trend continues and/or accelerates.  Currently the number of banks failed is behind 2010's number at this point one year earlier.

Weekly FED POMO Purchases

The FED performed four POMO (Permanent Open Market Operations) purchases this week in the amounts of ; 7.24 billion, 1.999 billion, 6.678 billion and 6.679 billion dollars.  This brings the total since November 3rd 2010 (The day the FED announced the printing of $600 billion by June 30 2010) to $589.08 billion dollars and since August 17th 2010 to $644.54 billion dollars.

Weekly Fund Flows

The fund flows report for 4/20/2011 showed stronger buying in domestic stocks again.  Domestic stocks showed $1.93 billion dollars of in-flows and Foreign stocks had $1.15 billion dollars of in-flows.  Taxable bonds continued to show strong buying with $3.32 billion dollars of in-flow, while Municipal bonds continued to see strong selling with -$1.151 billion of out-flows.  This is the 24th straight week of out-flows in municipal bonds.