Crisis Information Center
The objective of this page is to provide a comprehensive overview of the current economic trends and most importantly provide orientation for investors, business people and market participants.
Current focus lays on:
- Banking crisis
- Inflation and Deflation Data
- Budget Deficit and governmental tax income
- US bank failures (click to enlarge)
The US banking Crisis
Despite strong efforts to stabilize the "banking crisis" more and more banks have failed. The latest numbers from 2010 remain worrying.
The speed at which bank failures occur is of great concern to many depositors but also investors. The current trend shows a rapid uptake in bank failures since 2007. The trend is continuing without a tendency of a recognizable slow-down.
The number of banks closed per day started climb dramatically in 2009. The end of the trend is yet not in sight.
The number of failures per week has increased annualy since 2007. While in 2007 the record number per week was one failed institution it had climbed to already 3 failed institutions in 2008 and a maximum of 9 in 2009.
The trends for 2010 shows that this increase in maximum numbers of failures per week might continue, a strong sign for the continuation of the banking crisis.
(updated: 5th of March 2010)
A hidden Stock Market crash
Looking at the main stock indices you might not find arguments for a stock market crash since October 2009. In reality the long expected correction continued to take place, hidden by currency adjustments.
Main stream analysts will reject the following view. But one interesting way to look at markets is to compare them to real value, not only currency prices. Currently we measure stock gains and losses mainly in currency terms. But with the collapsing Dollar, people still might record nominal gains, while the purchasing power of their capital base has been silently eroded.
Measuring in Gold, as a good standard measure for maintained purchasing power, comes in handy. Once you compare stockss to gold, then you realize that in deed stock markets dropped!
(One should keep in mind that by purchasing 200 tons of Gold, the central bank of India rove up gold-prices and increased the Dollar value of its gold-reserves by 16%!) If Central banks think Gold, the average Joe should eventually follow.
The Chart shows the S&P 500 measured in Gold price levels
- (click to enlarge)
Tax income Shortfall of various countries
The comparison between the US and Germany´s income situation reveals a deterioation of boths countries income situation. The shortfall of the US in revenues exceeds the German shortfall by factor three.
US Receipts and Outlays Development
- (click to enlarge)
There is much of a discussion ongoing if the stimulus package actually leads to a recovery.
If so, then governmental spending would have to be compensated by an increase in tax income, as an indicator of increasing economic activity. The chart shows that tax income actually has decreased in 2009 compared to last year.
Even so, the months of September seems to indicate a trend of recovery, receipts are still around 20% below last year tax receipts.
The tremendous peak in outlays however is unprecedented. Obviously an increase in outlays does not immediately result in an increase in revenues - but it does increase the fiscal deficit!
US Debt Situation and Expectations
- US Debt Situation (click to enlarge)
The exploding US debt situation is becoming the most important threat to the global economy. Never before in more than 60 years of history, the debt has grown at this unprecedented rate.
While the 2009 increase in public debt is already of great concern to foreign investors and central banks, the planned debt increase by 2014 is of further concern.
The estimates provided do not take into account that the tax income situation, or debt financing cost (interest rates) are subject to significant change. An increase of interest rates could significantly reduce the ability of the US government to refinance in the short and medium term.
However, with a potentially collapsing Dollar and a shift in Purchasing Power Parity (PPP), currently outstanding debt would be reduced in value. This would require inflation to increase US domestic price levels and put Dollar exchange rates under pressure.