Recovery? Average Credit Multiplier Is Zero (M1 Multiplier Remains Below 1.0 At 0.74)

Bank lending since the financial crisis has been slow to recover, despite the massive intervention in financial markets by The Federal Reserve. Year over year growth in bank credit is back to 8%, last seen during the great recession.


The M1 Money Multiplier remains below 1.0 indicating that for every dollar created by the FED (an increase in the monetary base M0) will result in a <1 dollar increase of the money supply (M1).


Even worse, the average credit multiplier is … zero.


This would help explain the seeming;y forever declining M2 Money Velocity.


How does The Fed hope to stimulate the economy when the average credit multiplier is zero?


Tales From The Ozone: Average Wage Growth Only 2.2 Percent, 93.2 Million NOT In Labor Force

According to the NBER, the Great Recession ended in June 2009. But average wage wage growth in June 2009 was 2.8%. And the employment to population ratio was 59.4% in June 2009, whereas it is 59.3 today, hardly an encouraging sign.


The number of people NOT in the labor force swelled to 93.2 million. It was 81 million in June 2009.


And it is been almost 6 years since the end of The Great Recession. And we aren’t back to the peak full-time employment from Q4 2007.


So the most recent employment and wage numbers are straight from “Tales from the Ozone.”


I just had surgery on my right hand to remove the trapezium bone. So I apologize for any typos.

Q1 GDP Grows Only 0.2 Percent QoQ As Strong Dollar Clips Exports (NOT A Surprise!)

Today’s Q1 GDP report was NOT a surprise. In fact, it was expected.

The U.S. Economy Stalls in the First Quarter. The Atlanta Fed GDP NOW tracker called for 0.2% QoQ growth in Q1, so I wasn’t the least bit surprised.

gdpnow-forecast-evolution (10)

The Bureau of Economic Analysis (BEA) has the breakdown of the report at the link. But the low lights of the report are 1) nonresidential structure investment was down 23.1% in Q1 and 2) exports of goods was down 13.3% in Q1 thanks in part to the strong US dollar.


Yes, the strengthening dollar in Q1 damaged US exports.


While the easy straw man is the cold weather, bear in mind that only the northeast and midwest were cold. The South and West were quite nice (although a bit dry).

Zero Hedge has a summary of the CHANGE in Personal Consumption Expenditures. The biggest increase in PCE was healthcare and utilities (heat in the NE/Midwest) and AC in the West. So now we know where the savings went from lower gasoline prices — ¬†healthcare and heat (or AC)!

Personal Consumption Q1 2015_0

And there were IMPORTS of goods, which would have been difficult if New York’s harbor was frozen. So, the cold actually encouraged consumption of fuel which HELPED growth in Q1.


Simply Unaffordable II: Homeownership Rate Drops To 29 Year Low (As Rents Keep Rising)

Homeownership in the USA continues to fall as the US Bureau of Census releases their latest numbers for Q1 2015. The homeownership rate fell from 64% to 63.7%.


At the same time, median asking rents have just hit an all-time high. This is particularly troubling since wage growth is so dismal despite massive QE by The Federal Reserve.


Simply unaffordable!

Doctor, doctor (Yellen), here’s the news! We’ve got a bad case of … unaffordable housing.

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Simply Unaffordable! Home Prices Rise 5 Percent YoY While Wages Grow At Only 2.1 Percent YoY

Robert Palmer said it best. Home prices in the USA are “simply unaffordable.

The Case-Shiller 20 metro home price index rose 5 percent in February YoY.


The bad news? Wages are growing at only 2.1 percent YoY.


Denver and San Francisco saw the highest year-over-year gains in February, with 10% and 9.8% jumps respectively over the last 12 months.


Simply unaffordable.