Telegraph UK:
Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).
"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."
The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.
Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.
"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.
It is unclear why the US Federal Reserve has allowed this to occur.
Chairman Ben Bernanke is an expert on the "credit channel" causes of depressions and has given eloquent speeches about the risks of deflation in the past.
He is not a monetary economist, however, and there are indications that the Fed has had to pare back its policy of quantitative easing (buying bonds) in order to reassure China and other foreign creditors that the US is not trying to devalue its debts by stealth monetisation.
Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn.
So what do we have here?
Bush and Obama's "emergency" solutions (except for Lehman) have FAILED TO ACHIEVE THE MOST IMPORTANT OBJECTIVE...keep credit and liquidity flowing down to consumers and businesses.
WHY?
Banks kept the cash ...just in case. Can anyone blame them (no matter who is to blame for the greedy securities behaviors)?
So why would the feds bother to do all this and not ENSURE liquidity reached us?
BUSH AND OBAMA?
Because it was designed to save the "best" banks and institutions and NOT send liquidity down to us.
BIG GOVERNMENT IS ABOUT BIG THINGS. Big constituencies. Big institutions. Big donors. Big advertisers. Big arrangers.
DUH.
But now the bigger problem ensues.
We aren't spending. We WON'T SPEND until unemployment goes back down below 6% is my bet. And in the meantime NOTHING is stopping, or can stop deflation.
US banks are cutting lending by around 1pc a month. A similar process is occurring in the eurozone, where private sector credit has been contracting and M3 has been flat for almost a year.
As a small businessman, with an appreciable business proportion of incoming business dependent on leases of capital equipment and software .. this is the morning call to 'bring out your dead' and is just ANOTHER objective piece of evidence that our governemnt is totally full of haram baloney.
One federal interference on top of another ..soon we will hear about mandated loans as well as mandated cash reserves
If Bush OR Obama had been serious about the 'emergency' the week Lehman was allowed to die as opposed to everyone else, they could have just mailed out $13,000 per family instead of what they did. Americans would have paid their mortgages, paid up cards, and maybe bought a few things, and SAVED THE REST adding cash to the banks reserve line anyway.
Do I hear a waterfall ahead ahead of this stupid raft we are all on?
If you do not have enough protected liquid assets to last the rest of your life right now, be very concerned.
Obama may get his wish for an all inclusive government, but not in the way he envisioned.