U.S. Federal Reserve:
Flow of Funds Accounts
of the United States
Flow of Funds
The Fed's data on page 12 tells it all: The impact on the U.S. credit markets is not just a future scenario. It's happening right now.
Yes, the government is getting its money to finance its exploding deficits (for now). But it's hogging all the available supplies, while American businesses and average consumers are getting shut out or even shoved out.
* In the first half of last year, the U.S. Treasury raised funds at the annual pace of $411 billion in the first quarter and $310 billion in the second quarter.
* But if you think that was a lot, consider this: THIS year, the Treasury has stepped up its pace of borrowing to annual rates of $1.443 TRILLION in the first quarter and $1.896 TRILLION in the second quarter. That's 3.5 times and over SIX TIMES MORE than last year's, respectively.
Meanwhile, the private sector is getting killed ...
* Last year, banks provided new credit at the annual pace of $472.4 billion in the first quarter and $86.7 billion in the second. This year, they're not providing ANY new credit — they're actually LIQUIDATING loans at the rate of $857.2 billion in the first quarter and $931.3 billion in the second. So if you're running a business, you may want to think twice before asking your bank for more money. Instead, they may decide to TAKE BACK the money they've already loaned you!
* Ditto for mortgages. Last year, mortgages were being created at the annual clip of $522.5 billion and $124 billion in the first and second quarters, respectively. This year, on a net basis, mortgages haven't been created at all. Quite the contrary, the Fed reports that, on a net basis, they've been liquidated at an annual pace of $39.3 billion in the first quarter and $239.5 billion in the second.
* Getting cash out of credit cards and other consumer credit is even tougher. Last year, folks were able to add to their consumer credit at annual rates of $115 billion and $105 billion in the first two quarters. This year, in contrast, they've been forced to CUT back on their credit at annual rates of $95.3 billion in the first quarter ... and at an even faster pace in the second quarter — $166.8 billion.
Never before in my lifetime have I witnessed a more severe case of crowding out in the credit markets!
And never before has the CBO been so right in its forecasts of fiscal doomsday: One of its dire forecasts was already coming true even before it issued its report.