The US is being looted willy-nilly and my gut feeling is, is that this cannot go on forever. Eventually the bill is going to come due; the US will run out of creditors/good will.
How is this CRASH likely to manifest itself? What other countries will go down with the US? Are we talking food/fuel shortages in the US? Should I be dusting off my late '60s riot gear? CSN&Y "OHIO" anyone? In the end, might makes right. Nothing has changed since the caveman.
Left: non-borrowed reserves; right: borrowed funds. The FRB lends funds by selling T-bills, redeeming USD from foreign central banks and SIVs. The trend is not reversing. In fact, the FRB opened a new discount window for the Fannies and extended availability to all term credit facilities into Q2[?] 2009. The business press focusses on private-equiy/hedge fund losses because the bottom-line is too broad and too ugly to contemplate.
The various types of collateral accepted from borrowers (banks and "prime dealers" and their borrowers) is pro forma, professional courtesy, if you will, as these assets are otherwise worthless. Like establishing covered bond market of the same underlying, non-performing assets.
As you see, the reserve banks have a cash flow problem, which business analysts and economists attribute to "subprime" borrower defaults. Alas, the data engross also corporate borrowers who have been dependent on short-term (QoQ)"liquidity" provided by those banks to meet their operating expenses. You may have read recently about same-store closings and layoffs across a number of industries; I predict such crude cost avoidance will persist into Q4 2009 in order to create free cash flows for debt payments. Similarly, this graph, afaik, doesn't include savings & loan and credit union cash flows although these corporate entities are regulated by US treasury bureaus. They can't directly sell debt in foreign markets. So as far as I can tell FDIC is mostly reporting (small cap) S&Ls and community bank failures quarterly. I predict reserve banks will acquire their assets, cheaply.
Ultimately, food/fuel shortages in the US will be dependent on (1) decelerating production volume (2) producer price inflation which passes through to consumers such as yourself, specifically, how much of either you are willing and able to purchase.
If you're out of a job and unemployment insurance or you can't liquidate your portfolio, you may well find yourself at a "faith-based" pantry to collect "means-tested" rations. Diversity is the key to economic and political evolution.
See research.stlouisfed.org for the series above.
The other I believe may originate from econopicdata.blogspot. Ritholz at TheBigPicture frequently posts Jake's graphs. (The data set above though will have come ultimately from the FRB, federalreserve.gov, Statistics: Releases and Historical Data) Diversity is the key to economic and political evolution.
