Tuesday, March 30, 2010

US Bank Closings Continue Record Pace

So far in 2010, the FDIC reports that 41 US banks have closed, vs 21 banks in the same period last year. Wow, twice the rate of failure...remind me please of the meaning of "green shoots."

The Federal Deposit Insurance Corporation has already burned through the funds that it collects through a levy on bank deposits, so the US taxpayer is on the hook to give the depositors back their money.

The Federal Accounting Standards Board is responsible to ensure that the rules of accounting properly value the assets and liabilities of businesses, including banks. Their institutionalized version of wishful thinking has led to a gross overstatement of the value of bank loans, delaying the inevitable and adding to the final reckoning. How gross? 59% was the average across the four most recent failures, according to this source.

In the US, when your unemployment benefits run out, you are no longer officially unemployed. The real level of unemployment is 22% not 10%, according to Shadowstats. The stock market may be at cheerful levels, buoyed by government money and CNBC spin, but the real economy is not.

Why is the stock market at cheerful levels? Well, the Zimbabwe market managed some pretty impressive numbers too. Here is the chart from 2007, when it was the best performing stock market in the world. No one got rich in real terms, but the numbers look impressive...

If it can't go on forever, it won't go on forever.

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