Failure To Act And Excess Reserves

Jobless men signCould not help but post this from John @ acrossthecurve.  He was one of the eight bloggers who sat down with Treasury officials last week and seems further disgusted at the Feds lack of fluidity injection; or more so, action in the opposite direction of what mainstream feels should be taking place here.

 Nov. 9 (Bloomberg) — The U.S. unemployment rate may rise to a post-World War II high of 13 percent in the aftermath of the recession, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.  

“This is going to be the mother of all jobless recoveries,” Rosenberg said today in an interview on Bloomberg Radio. “At the beginning of the year, who was calling for unemployment to go up to 10 percent?”.  Rosenberg said the recession, the deepest since the Great Depression, “is truly secular in nature” and said the economy is “in a post-bubble credit collapse.”

Bank ReservesAlso of interest is this paper from the NY Fed on Why Are Banks Holding Excess Reserves; reserves over and above what is required.   Just a mere glance to the chart right and one can see the amount is staggering.   Obviously the money is not flowing back to consumers and small business in terms of lending so is this an inflationary (or deflation or hyperinflation) hedge or in preparation for the glut of foreclosures and write downs to come in 2010?  I urge you to read the paper and arrive at your own conclusions.  Happy trading.

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