Extremely Over Stimulated

An interesting post over at The Economics of Oil Empire and Peak Oil pointing out that extreme government borrowing only gives the appearance of economic growth.

Thus, properly perceived, the private sector of the US economy is not growing and cannot grow with the price of oil above $40-$60. Gov't deficits of 10%+ of GDP (and 5-6% less the decline in receipts) merely give the appearance that the overall GDP is no longer contracting, whereas the private sector continues contracting yoy at a rate which occurred during the worst recessions of the 20th century.

A "double dip" for the US private sector will likely occur from a growth rate at or below zero.

My hope is that the government cuts spending, reduces "entitlements", and consumers de-leverage as orderly as possible as soon as possible. Then we can borrow again.

BFF

Bank Failure Friday (BFF) is where the FDIC shuts down banks due to violations of regulatory capital requirements. The bank is unable to honor its liabilities (your deposits) and its assets are given to another more solid bank with funds to cover the losses from the FDIC's Deposit Insurance Fund.

Even though the rate of failures is increasing the loss rate appears to be diminishing. Losses in excess of 30% were not uncommon meaning the bank was allowed to be severely broken before action was taken. Recent weeks, however, have losses to the FDIC falling below 25%. Sun American Bank in Boca Raton, FL, for instance, was seized today with $535M in assets and cost to the FDIC deposit insurance fund of $105M. Less than 20%. This is good news. The FDIC is taking prompt corrective action and following its mandate and insuring the safety of customer deposits.