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https://preview.redd.it/t2cjys7onk2b1.jpg?width=260&format=pjpg&auto=webp&s=50e65f4d3b47fe4233bde8859c0f701715d683e7
Photo Above - A "disturbance" breaks out among inmates at Folsom Prison as a song by Johnny Cash reminds them how everyone gets screwed. Not shown - disturbances breaking out among voters on our debt crisis. ​
“U.S. leaders gamble with world’s most trusted asset in debt showdown (msn.com)
There's so much wrong with this headline (see link above) I don't know where to begin.
First of all, our current leaders (Biden and McCarthy?) are hardly the ones who created this mess. Nor are they the clowns that any sane person would pick to fix it. The $31.4 trillion national debt ($250,000 per taxpayer) has been building for eons. Let's concede that 2021 and 2022 did see some of the most absurd government spending ever. If America's financial reputation is, indeed, “our most important asset”, why even trust it some random president and congress who happen to get elected in an even numbered year?
Wait – we don't do that? We don't have our money controlled by them? Then now DOES it work?
The US financial system is managed by UNELECTED bureaucrats. Not politicians who we can hold accountable on election day. This would explain so much. Except how we now owe $250,000 each in federal debt. Here's my theory on how we got here.
The Federal Reserve Chairman is appointed. From a crew of Fed governors, who themselves are appointed. To 14 year terms, in odd numbered years. This is supposed to appear bipartisan. But does zero to ensure competence. One of the Federal Reserve governors succeeded in driving his own bank into insolvency this year. This should serve as a wakeup call, eh?
The FDIC Chairman is appointed to a 5 year term. Again, because he wears a non-partisan uniform. His job is to use FDIC money (actually, our money) to bail out banks which fall into a hole and die. His job is also to send in examiners to detect and end risky practices, to prevent banks from falling into a hole and dying in the first place. Well, THAT'S been going really well, hasn't it?
The Secretary of the Treasury – this year our Treasury Secretary is 77 year old Janet Yellen. Nominated by the more mature President Biden. Some people would say “give her a break, she's a woman and she's new at this – only been on the job for 2 years”. Think again – Janet first began working at the Federal Reserve over 50 years ago. Been there at least four times. In between she's variously been: a Harvard professor; chair of the Council of Economic Advisors; a professor at University of California Berkeley; a Brookings Institution think tank expert . . . If you want to find someone's fingerprints on this financial mess, Janet's are everywhere, going back 50 years. Her signature is also on every dollar bill in your wallet.
The Comptroller of the Currency – flies under everyone's radar. Can you even name him? (Michael Hsu.) His direct supervisor is Treasury Secretary Janet Yellen. But she has almost no power over him. The Comptroller is nominated by the president – ALSO for a 5 year term - to appear non-partisan. But that doesn't necessarily mean that he's in cahoots with those 5 year FDIC guys. Even though his job sounds similar: “to investigate misconduct committed by institution-affiliated parties of national banks, including officers, directors, employees, . . . “
Okay – those 4 appointees should be enough to get the job done, right? But wait, there's a bunch MORE federal agencies with their fingers in the money pie. The Consumer Financial Protection Bureau – created after the 2008 banking system meltdown. The Federal Financial Institutions Examination Council. A special regulator for Credit Unions, and another for mortgage lenders. The Securities and Exchange Commission; the Congressional Budget Office. The Government Accountability Office (aka Government Accounting Office); the Council of Economic Advisors; the Office of Management and Budget; the Office of Economic Policy; the Financial Stability Oversight Council. Not to be confused with the similarly named “Office of Financial Stability” . . . and 50 state banking regulators too, of course.
If you concluded that responsibility for this mess is spread so thin as to be almost nonexistent - you get a gold star. Quick . . who would you actually blame any specific thing? None of these appointed geeks actually does anything other than preside over staff spending money that doesn't even belong to them. Of course, that's how we ended up in debt over our eyeballs. And these guys are all saying “no problemo – just raise the spending limit so I can get back to work and stop answering your annoying questions”. (Janet Yellen, I'm looking at you). I just made that quote up. But that's the vibe coming out of the White House, the Treasury Department, the Federal Reserve, the FDIC, and congress, isn't it?
Actual leaders - in a democracy - are accountable to voters. The appointed bureaucrats aren't. And the few people who ARE elected to their jobs (the president, leaders of the senate and house) probably can't balance their own checkbooks. Biden isn't even allowed to drive, or go to the bathroom by himself these days.
We now have the highest interest rates in a generation. The highest inflation rate too. Record spending on everything imaginable – defense, welfare, education, healthcare, infrastructure, social security, spotted owls . . . and we still have homeless camps 2 miles long.
Yesterday a deal was reached to increase the national debt – and government spending. Hooray - we are saved!
“Ask everybody who ain't asleep to stand right up and yell . . .” \*
\ lyrics to “Hey Porter”, the first song written by Johnny Cash (1954). Ry Cooder's cover of this song may be more compelling than Cash's original version though.*

Introduction
Here's another effortpost on Brazil! This time I'll be talking about why the Brazilian economy stagnated, and what we can expect from Lula in terms of economic policy (I've talked about this in the past but now I'll go into more detail).
Between 1920 and 1980, Brazil was a clear economic success story. For 60 years, our GDP per capita grew at an average of 4% a year. This 'golden age' ended in a hyperinflation crisis, which made the 1980s become known as a 'lost decade', and since its resolution in 1994 with the Plano Real, our economy has experienced minimal growth: from 1980 to 2020, the average GDP per capita growth rate was only 0.7%.
Evolution of the Brazilian per capita product, at 2010 prices, from 1900 to 2021. The scale of the graph is logarithmic in base 2.
In this post, I'll try to explain the reasons for Brazil's low growth in the last four decades and what Lula's plans are to address them.
The debate
Before delving into the actual causes of the "semi-stagnation", I would like to explain the economic debate in Brazil. This debate revolves around two major groups of economists: the "developmentalists" and the "liberals." The term "developmentalism" may be unfamiliar to many people here, but it is very present in Latin America. A decent explanation for it could be "dirigisme with Latam characteristics."
In short, liberalism in this context is associated with economic orthodoxy and a pro-market orientation in economic policy, while developmentalism leans towards economic heterodoxy and advocates for direct state interference in the economy. This debate is, in theory, separate from the traditional right versus left political divide, as we have had governments from both ends of the political spectrum adopting policies aligned with either school of thought. For instance, Lula I (2003-2007) represented a left-wing liberal government, while Geisel (1974-1979) presided over a right-wing developmentalist government. However, in practice, liberalism is associated with the right-wing while developmentalism is associated with the left-wing.
One area of major divergence between those two groups is full employment. Liberals argue that the Brazilian economy generally operates at full employment, which means that there are well-defined supply-side limits and restrictions in the economy, whereas developmentalists believe it tends to operate below that level. This implies that the economy's natural state is one of perpetual aggregate demand deficiency, and thus the government could just increase spending to mobilize idle production factors and stimulate economic growth.
Furthermore, liberals typically view direct state intervention in the economy with distrust, opposing increased public investments in infrastructure and most forms of industrial policy. Their preference generally leans towards reducing government spending and relying on a 'crowding in' effect, together with supply-side reforms. Conversely, developmentalists perceive state intervention as a necessity to stimulate the economy, favoring a robust industrial policy and increased public investments.
Those are significant oversimplifications, and many economists do not align themselves with either group. In any case, I would say this categorization reasonably represents the current debate.
It's a tradition in Brazil to divide ministries between liberals and developmentalists to ensure a balance between the two. The current Finance Minister, Fernando Haddad, believes in a middle ground approach, with some of his secretaries (e.g., Guilherme Mello) leaning more towards developmentalism, while others (e.g., Bernard Appy) lean more towards liberalism. Planning Minister Simone Tebet and Industry and Commerce Minister Geraldo Alckmin are firmly in the liberal camp. However, due to the nature of his ministry, Geraldo Alckmin will probably concede more to developmentalist policies (as he's already doing). Aloizio Mercadante, the President of the National Bank for Economic and Social Development (BNDES), is considered the leader of the developmentalist branch of the government, along with Workers' Party President Gleisi Hoffmann (some people jokingly refer to her as the main opposition to Fernando Haddad and the 'Twitter Shadow Finance Minister' due to some of her tweets).
Without further ado, let's get to the causes of Brazil's stagnation.
Guido Mantega (Finance Minister between 2006 and 2014) and Antônio Palocci (Finance Minister between 2003 and 2006). Mantega is associated to developmentalism and Palocci to liberalism.
Education
First of all, the significant growth of the 20th century left a terrible educational legacy. Brazil only began to have a somewhat consistent educational policy in the 1990s and 2000s, when basic education was universalized. To put it into perspective, in 1990, the average number of years of schooling in Brazil was 3.8 years. Even Sub-Saharan African countries like Congo, Zimbabwe, and Zambia had higher average schooling levels than ours. Approximately a quarter of the population were illiterate.
The key change came with the 1988 Constitution, which decided that Brazil would try to become an European-style social democracy. Since then, considerable progress has been made, but clearly not enough. The main educational bottleneck lies in Elementary School II, which typically spans the ages of 12 to 15. It is during this stage in Brazil that the discrepancy between age and the appropriate grade level drastically increases, leading to higher rates of grade repetition and students falling behind in their education.
This problem is probably related to the transition from a single teacher trained in pedagogy in Elementary I to several specialists teaching only one subject. This transition also occurs at the onset of adolescence, which is naturally a turbulent phase already, with the introduction of drugs, alcohol and various forms of prejudice being normal. The result ends up being a distancing of the student from school.
Two Brazilian states, which have been governed by center-left parties for many years, serve as examples in Brazilian educational policy: Pernambuco and Ceará.
A highlight in Ceará is the Programa de Afabetização na Idade Certa (Program of Alphabetization in the Right Age), which aims to ensure that all students in the state's public school systems achieve literacy by the age of 7. The plan was based on the following pillars: (1) the elaboration of a specialized literacy curriculum that was adopted in all the municipalities, with structured materials for teachers and students containing a daily routine of classroom activities and homework assignments; (2) pedagogical practices to encourage reading in the classroom; (3) financial incentives for the municipalities that achieve better results in education; and (4) evaluation and monitoring of the program, with a census and diagnostic test that is applied at the beginning of every semester.
Pernambuco has implemented a Full-Time High School system that stands out. The system is based on the following pillars: (1) the introduction of a subject called "life project," which encourages students to create plans with goals and objectives for their lives; (2) guided study, providing a space for autonomy in learning and fostering self-directed learning skills; (3) hands-on, practical classes that combine theory and practice; (4) youth clubs, where collective interests of young people are pursued; (5) tutoring, where teachers (tutors) interact with students to support their development; and (6) full-time education, of course.
Both plans have been tremendous successes and could be implemented nationwide. The Member of Parliament Tabata Amaral has proposed the program "basic education like Ceará's, high school like Pernambuco's." We might see that put in practice. Izolda Cela, the mind behind Ceará's basic education plan, is the Executive-Secretary of the Ministry of Education, and the current Minister of Education is Camilo Santana, the governor of Ceará between 2014 and 2022.
Izolda Cela (Executive-Secretary of the Ministry of Education) and Camilo Santana (Minister of Education).
Public Investments
Furthermore, there is a general consensus that the significant decrease in public investment since 1980 explains part of the problem. During the Golden Age of Brazilian growth, public investment mounted to about 6% of GDP, whereas it currently stands at approximately 4% since the lost decade. Liberal economists tend to attribute this to the expansion of the welfare state, that came with a substantial increase in the tax burden (from 25% of GDP in the 1970s to 35% in 2000). On the other hand, developmentalist economists point to the decline in public savings due to the privatization of state-owned enterprises in the 1990s.
In his second government, Lula created the Programa de Aceleração do Crescimento (PAC) (Growth Acceleration Program), whose objective was precisely to expand public investments. Unfortunately, the plan ended up with highly controversial results, primarily due to the low administrative capacity of the Brazilian State and corruption (some like to call the plan the Corruption Acceleration Program!).
But now the Workers' Party has gained new experience. Many of its state governments became famous for extensive investment programs in partnership with the private sector, delivering positive results. Chief of Staff Rui Costa, in particular, had a successful experience with public-private investments during his tenure as the governor of Bahia. He is now expected to lead the "New PAC", which will probably be announced at some point between today and July. (The project still has no name and is provisionally being called "New PAC").
Here's what Rui Costa has said about the project: "We will have, in an unprecedented way, investments with Public Private Partnerships (PPIs) at the federal level. Many states, including Bahia, have made PPI projects. [...] We are negotiating with the Ministry of Finance the conditions for guarantees so that we can leverage these projects."
Lula wants to meet with the 27 state governors to determine which state projects the Union should prioritize for its investments. In recent weeks, Costa has held individual meetings with the state governments to define which projects will be included in the new PAC. In all, eight governors have already been heard.
In a speech on the May 1st holiday, Lula said the following about the project: "We are inviting foreign businessmen to invest in Brazil and we are showing them the great projects that we are going to present in the third PAC. It will be the largest infrastructure project in this country."
Former Governor of Bahia (2014 - 2022) and current Chief of Staff Rui Costa.
Deindustrialization
Another problem is the early deindustrialization that is taking place in Brazil: we are losing our industry before becoming rich. In the beginning of the lost decade, the industry accounted for one-quarter of the Brazilian GDP, whereas today it represents around one-tenth. The reason for this process is complex, and once again, economists disagree. Liberals point to the new form of production organization that emerged with globalization, where the manufacturing of goods was fragmented into different stages, each executed in different countries. According to this line of thinking, Brazil failed to adapt to the new industrial configuration and remained stuck in an unrealistic autarkic dream. On the other hand, developmentalist economists usually argue that after the end of hyperinflation, Brazil fell into a trap of having an overvalued currency and high interest rates, demolishing the industry's competitiveness. (I am more inclined towards the first thesis, although it is a fact that the Brazilian exchange rate was detrimental to the industry after the Real Plan).
Now I want to talk a little bit about the Brazilian industrial bourgeoisie and its problems. In the 1960s, the then sociologist and future president Fernando Henrique Cardoso published his thesis on the Brazilian industrial entrepreneurs. Based on his research, he concluded that Brazilian industrialists did not have any national project, and (1) "only cared about their personal interests when speaking on behalf of the class" and (2) "[their] political action consists of personal participation in the patrimonialist game." Brazil has a serious problem related to what we call 'patrimonialism,' which refers to the capture of resources from the Brazilian state to benefit private interests.
Unfortunately, industrial policy in Brazil often results in tax exemptions, subsidies, tariff protections, etc., for an inefficient, patrimonialist, and somewhat broken industry that was developed in the 20th century. The Workers' Party itself fell into this outdated corporatism while in power, especially during the first Rousseff administration (2011-2015). It is a shame that advocating for greater state involvement in the economy ends up becoming a defense of those interest groups.
In this sense, I find myself opposed to both liberals and developmentalists. While the latter end up promoting an agenda that only benefits private interests, albeit with good intentions, the former dismiss any state planning, believing in an 'economic abiogenesis.' Since 2016, we have been reducing the role of the state and waiting for a crowding in effect, but with no success. We need strong a industrial policy, but it has to be transparent and not perpetuate the old game of patrimonialism.
In the words of the brilliant economist Laura Carvalho: "We want a State that identifies ways to stimulate technological innovation and product development in partnership with the private sector. But this policy cannot become hostage to the existing private sector. We have remnants of our industry of the 20th century, for example the automobile industry, and when we do industrial policy, we end up just giving incentives to them. This is a state that does not choose winners, but rather is chosen by losers. Those who are struggling in the industry try to eat the resources of the state to survive."
Unfortunately, the signals from the new Lula government are quite negative. Industry and Commerce Minister Geraldo Alckmin recently announced a plan of incentives for the automobile industry, which is essentially the same program that has failed several times in the past. There are positive things coming from his ministry, but few of them have much to do directly with a well-made industrial policy. It's a shame.
His plans beyond industrial policy appear positive, as shown in the following excerpt, at least: "Brazil had an early deindustrialization. Europe also deindustrialized, but ours was precarious and severe. More than reindustrializing, we need a neo-reindustrialization. A central issue is the competitiveness agenda. There is a principle in medicine that says: suppress the cause and the effect ceases. We have to act on the causes of low growth. Our tax model generates an absurd cost for companies. It is not fair. We have an absurd judicialization that leads to legal insecurity and hinders exports. The whole world has a VAT (value added tax. I defend it. I think Haddad is doing well and I am a great enthusiast of the tax reform."
Probably more than any other politician of expression today, Haddad positions himself as a republican and talks about reducing the patrimonialist distortions of the Brazilian public budget. He talks about "closing the drains of what is called Brazilian patrimonialism" and "ending a series of abuses that have been committed against the fiscal base" of the country. He says that many sectors have been "overly" benefited "with rules established over the decades and that have not been reviewed by any outcome control. Many have expired from the point of view of efficiency, and need to be revoked."
Former Governor of São Paulo (2001 - 2006; 2010 - 2017) and current Vice-President of Brazil and Minister of Industry and Commerce Geraldo Alckmin.
Business Environment
Brazilian productivity has been stagnant for decades. What is causing this? The main suspect is the Brazilian tax system. There is an enormous complexity in the various indirect taxes (ISS, ICMS, PIS/Cofins, and IPI), which forces every company to have an excessively large department dedicated to tax payment. Additionally, numerous divergences of interpretation arise between the Federal Revenue, state authorities, and businesses. On every corner of our cities, there is a specialized tax law office to assist companies in dealing with the extremely high level of litigation in our taxation system. To make matters worse, our indirect taxes discourage investment in locations with higher social returns, as the tax complexity and special tax regimes artificially alter the profitability of investments and production. A general simplification of these taxes, with the adoption of a Value Added Tax, could have an impact on the economy's efficiency equivalent to the Plano Real, which ended hyperinflation.
Even beyond the tax issue, the Brazilian business environment is terrible. According to the World Bank's Doing Business 2020 report, which measures the ease of doing business in 190 countries, Brazil ranks 124th. This problem is related to excessive bureaucracy, unexpected judicial decisions, loopholes in regulatory frameworks, and disrespect for contracts.
The Tax Reform is going to be the government's main priority after the approval of the New Fiscal Anchor. Planning Minister Simone Tebet summed up the reform as follows: "The Tax reform is the only silver bullet that we have to save Brazil."
And here's what Finance Minister Fernando Haddad has said about it: "There is no way to grow Brazil's productivity with this tax system [...] We are developing a tax reform that is even more modern, because it introduces in the national tax system a Value Added Tax that solves a good part of the flaws of the current system that, in my opinion, is the great villain for the low growth rates of our productivity." The idea is to approve the Tax Reform still this year (Haddad talks about doing it in the first semester!).
Special Secretary for Tax Reform Bernard Appy.
Economic Isolation
Brazil has a very closed economy. Among the 160 countries analyzed by the World Bank, the Brazilian economy is only less open than that of Sudan. The average protection applied by Brazil to capital goods is 14 times higher than in Chile and 25 times higher than in Mexico. This is probably the most expressive cause of the low productivity and deindustrialization in Brazil, together with the tax system. Here, I quote the brilliant economist Edmar Bacha: "[The closure of the Brazilian economy during the Geisel government (1974 - 1979)] caused a tremendous drop in the economy's productivity and an increase in the cost of capital goods. And this, I believe, is what lies at the root of our stagnation after the so-called economic miracle (1968-1974). Our industry became unable to compete internationally. And we were forced, because the industry has this extraordinary lobbying capacity, to prevent the redesign of the Brazilian industry to participate in global value chains."
Bacha's argument makes sense: the collapse of GDP growth coincides with the collapse of capital accumulation (the growth rate of the capital stock) after Geisel's government. Why did capital accumulation collapse? Bacha explains that using a decomposition of the investment = savings relationship: K' = s(1/p)v - δ, where K' = capital accumulation, s = savings rate, p = relative price of investment, v = output-capital ratio, and δ = depreciation rate.
Between 1950-1980, the "golden age" of Brazil, K' grew at nearly 9% per year. Between 1981-2014, this number was 3%. Why? Looking at the historical series, the difference is not in savings or depreciation. What happened was that the output-capital ratio fell by about one-third, and the relative price of investment increased by one-third. In other words, the capital requirement per unit of output increased significantly, and at the same time, the price of investment goods rose significantly. According to Bacha, this process occurred between 1973 and 1983, a period in which the Military Government pursued an autarkic economic policy.
The ideal scenario for Brazil would be to open its economy and have an export-oriented industry. The industry we have developed is heavily reliant on our domestic market, without external competition. In the words of economist Nelson Barbosa: "Brazil cannot produce ships, but it can produce airplanes. Brazil does not have car manufacturers, but it has bus manufacturers. Brazil cannot have a domestic production of microelectronics, but it has a good domestic production of electric motors. So we need to study what worked in these sectors to see if it can be replicated in other sectors. All these successful sectors, Embraer, Weg, Marco Polo, are sectors that are competitive in Brazil and in the world. Here is the first clue: correct industrial policies create domestic production that competes domestically and internationally. They are integrated products that import and export extensively. Value chains."
However, an open trade policy without a plan may not be positive either. In Nelson's words: "Development always means increased productivity. Opening the economy can stimulate productivity, but it can also lead to a negative specialization. You can open your economy and become a country that only exports commodities, with an inflated services sector that only sells domestically, with a significant portion of your population relying on informal jobs. Which is what happens in Brazil. So I think trade openness is inevitable, more developed countries are more open, but thinking that just opening up will automatically lead to development is naïve and something we shouldn't do in the 21st century. I believe that strategic trade integration is crucial and necessary for development. Unilateral openness, without any plan, will only reinforce the specialization we already have today."
In any case, it is certain that the current excessive protectionism cannot be maintained. Opening up would allow broader access for companies to (1) cheaper and higher-quality inputs and (2) foreign-produced capital goods and technology, (3) create significant competition effects to invigorate the economy, and (4) create a 'selection effect' that would eliminate losers and favor winners.
But this is the agenda that I am least hopeful about. Trade openness is a topic that faces strong opposition from the Brazilian left and would likely only occur under a moderate center-right government. I hope, at least, that some trade agreements can be reached to open up the economy. The European Union-Mercosur trade agreement would have a significant impact and would be very important but I'm not very hopeful that it'll be approved.
Haddad is still optimistic, though! He said that a more emphatic diplomatic effort will be made starting in the second semester, in a movement that will take advantage of Brazil's leadership in Mercosur and Spain's leadership in the European bloc.
Simone Tebet (Planning Minister) and Fernando Haddad (Finance Minister).
Credit
Interest rates in Brazil are much, much higher than the global average. Our credit is scarce and dysfunctional. Lula likes to repeat that Brazil is a capitalist country without capitalism because there is no credit.
Brazil has the second-highest bank spread in the world, second only to Madagascar. This means that banks in Brazil charge very high interest rates for lending money. To give you an idea, Brazil's bank spread is higher than the average observed in countries at war. There are several reasons for this, but some stand out: (1) savings in Brazil have historically been very low (around 20% of GDP), (2) the government consumes a significant portion of savings to finance itself, and (3) the Brazilian banking sector is extremely concentrated, with a few banks dominating the entire sector.
The other issue in this discussion is the current policy interest rate set by the Central Bank. Brazil currently has the highest real interest rate in the world, at around 9%. The debate about whether this interest level is correct or not is quite active in Brazil, with its proponents arguing that the current Brazilian inflation is demand-driven and pointing to inflation in the services sector and core inflation, while its critics argue that inflation is not demand-driven, pointing to the fact that Brazil has had a negative output gap since 2015 and that supply shocks can explain the inflation in services.
This debate is complex, and it is hard to determine definitively which side is right. Nevertheless, the Central Bank is strongly adhering to the first thesis.
The current Chairman of the Central Bank, Roberto Campos Neto (RCN), is the grandson of an economist of the Military Dictatorship and was appointed by Bolsonaro. He will remain in his position until 2024 due to the new autonomy granted to the Central Bank in 2021. In this scenario, Lula engaged in a public war against RCN, urging him to lower interest rates. The situation became tense, but Lula never showed any willingness to take effective action to remove him, remaining only in rhetoric. Throughout the conflict, Haddad positioned himself as a moderate, playing a certain "good cop, bad cop" game with Lula and gaining trust in the financial market. Apparently, Lula intends to nominate former executive-secretary of the Finance Ministry Gabriel Galípolo to replace RCN in 2024. He was recently appointed as director of monetary policy at the Central Bank, and is widely identified as a heterodox economist.
Haddad's current plan is to stabilize Brazil's deficit to allow for a monetary loosening. Here's what he said: "We are not at a point where fiscal expansion is going to help the economy. If there is room for any stimulus, it will be monetary. If we know how to make the transition, there is room for a lower interest rate, you just have to give security to the monetary authority." He does not seem to be concerned about banking concentration, though.
Chairman of the Central Bank Roberto Campos Neto.
TL;DR
The Brazilian economy has seen very little growth since the the lost decade in the 1980s. One of the primary factors contributing to this stagnation is the economy's low productivity. There are several reasons behind this low productivity, including:

1. Inadequate infrastructure and insufficient investments in its development.
2. A significant delay in comparison to other countries in terms of investing in education.
3. Unreasonable economic protectionism.
4. Private groups exerting undue influence and capturing the Brazilian state (patrimonialism).
5. Failure to adapt our industry to a globalized world.
6. Excessively high bank spreads.
7. A terrible business environment, particularly due to the tax system.

There are other reasons for sure, but I'd say most people would agree those are the most important ones. Also, here's my effortpost on the Workers' Party, in case you haven't read it.

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But better options are now available after years of advocacy from consumer groups and new federal rules. Some large banks now offer small-dollar loans at rates far cheaper than payday loans. Since 2018, six banks — Bank of America, Huntington Bank, Regions Bank, Truist, U.S. Bank and Wells Fargo — let checking-account holders take out short-term loans of $10 to $5,000, making it more affordable to handle a financial emergency or make a purchase.
"They require no travel to a branch and no waiting for an online lender to review an application and transmit the funds," the Pew Charitable Trusts wrote in a recent report. "Instead, customers complete short applications via the bank's website or mobile app [LOANSANGEL], and the bank deposits the funds, usually within minutes, into the customer's existing checking account."
The typical interest rate on such products, sometimes called installment loans, can rise as high as 18%. But that's less than the nearly 21% average annual percentage rate on credit cards today, and they're far more affordable than the short-term financing peddled to people with poor credit, such as payday, car title or pawn shop loans. Compared with such options, a small bank loan is about 5 times cheaper, Alex Horowitz, who leads Pew's consumer finance research and authored the lending report, told CBS MoneyWatch.
Payday loan math: $1,000 loan over a 12-month term would have a total cost, including interest, a total payback amount of $1,134.72. APR 29.82%. Rates between 5.99% APR and 35.99% APR for qualified customers. Loan term lengths from 3 to 36 months for qualified consumers.
Some states have moved to regulate these loans, with 18 states capping APRs at 36% or less, according to the Center for Responsible Lending.
It doesn't take a financial disaster to push people into borrowing. In a 2022 survey, the vast majority of borrowers said they used a payday loan for everyday expenses, such as food, rent or utility bills. Just 16% said they had an emergency expense, and 8% said they used the loan for "something special."
\"A lot of Americans don't have much margin for error and need a little help when they get fewer hours at work in a week or have an unexpected expense,\" Horowitz said.
​
Payday loans have one major benefit: They're a fast way to get money if you're desperate.
Until recently, banks generally shied away from offering small-dollar loans. It wasn't clear that it was legal for banks to lend without pulling a credit report, the cost of which outweighed the potential profitability of lending a small amount of money to a financially strapped customer.
But after guidance from financial regulators in 2020, some banks started offering these products, which rely heavily on automation and a customer's checking account history. Examining how often a customer makes deposits and withdrawals is often a better indicator of whether they can repay a few hundred dollars than a traditional credit report, Horowitz said.
Because the process is so automated, there's no way to ask for one, Horowitz noted — a person logs into their bank account, and if they're eligible to ask for a loan they'll see the option. "Banks want to show these loans to people who qualify for them, not people who don't," he said.
Some credit unions offer a similar product called a Payday Alternative Loan. Still, Horowitz said that tens of millions of Americans lack options for affordable borrowing in a pinch, and Pew is pushing for more banks to offer this option.
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Absolutely floored to see this, even though I knew it was coming. Keep fighting everyone! I didn’t this all on my own, after nearly 5 years.

Happy Friday Superstonk, resident Jellyfish back with you to review this weeks commercial bank deposit data (and how deposit outflows are being 'made up' with borrowing from sweetheart liquidity programs for the banks.
I hope everyone enjoys the long weekend!
Let's get to it!
https://www.federalreserve.gov/releases/h8/20230526/
https://fred.stlouisfed.org/series/DPSACBW027SBOG
A little over a year ago (4/13/2022) the high was hit at $18,158.3536 billion

Date	Deposits, All Commercial Banks (billions)	Down from all time high (billions)
4/13/2022	$18,158	0
2/22/2023 (Run picks up speed)	$17,690	-$468 billion
3/1/2023	$17,662	-$496 billion
3/8/2023	$17,599	-$559 billion
3/15/2023	$17,428	-$730 billion
3/22/2023	$17,256	-$902 billion
3/29/2023	$17,192	-$966 billion
4/5/2023	$17,253	-$905 billion
4/12/2023	$17,168	-$990 billion
4/19/2023	$17,180	-$978 billion
4/26/2023	$17,164	-$994 billion
5/3/2023	$17,149	-$1,009 billion
5/10/2023	$17,123	-$1,035 billion
5/17/2023	$17,152	-$1006 billion

All this money pulled from commercial banks as M2 (U.S. money stock--currency and coins held by the non-bank public, checkable deposits, and travelers' checks, plus savings deposits, small time deposits under 100k, and shares in retail money market funds) is decreasing:

https://fred.stlouisfed.org/series/M2SL
https://www.federalreserve.gov/releases/h6/current/default.htm
A little less than a year ago (July 2022) the M2 high was hit at $21,703 billion

Date	M2 (billions)	Down from all time high (billions)
July 2022	$21,703	0
August 2022	$21,660	-$43 billion
September 2022	$21,524	-$179 billion
October 2022	$21,432	-$271 billion
November 2022	$21,398	-$305 billion
December 2022	$21,358	-$345 billion
January 2023	$21,212	-$491 billion
February 2023*	$21,076	-$627 billion
March 2023	$20,840	-$863 billion
April 2023	$20,673	-$1030 billion

^\Bank run in commercial banks picked up in February 2023.)

1. M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of other checkable deposits (or OCDs, which comprise negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions) and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and other liquid deposits, each seasonally adjusted separately.
2. M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (2) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing small-denomination time deposits and retail MMFs, each seasonally adjusted separately, and adding the result to seasonally adjusted M1.
3. Currency in circulation consists of Federal Reserve notes and coin outside the U.S. Treasury and Federal Reserve Banks.
4. Reserve balances are balances held by depository institutions in master accounts and excess balance accounts at Federal Reserve Banks.
5. Monetary base equals currency in circulation plus reserve balances.
6. Total reserves equal reserve balances plus, before April 2020, vault cash used to satisfy reserve requirements.
7. Total borrowings in millions of dollars from the Federal Reserve are borrowings from the discount window's primary, secondary, and seasonal credit programs and other borrowings from emergency lending facilities. For borrowings included, see "Loans" in table 1 of the H.4.1 statistical release.
8. Nonborrowed reserves equal total reserves less total borrowings from the Federal Reserve.

However, borrowing from the liquidity fairy is spiraling to make up for it shrinking M2 and dwindling deposits:

1. Bank Term Funding Program (BTFP)
2. Discount Window/Primary Credit
3. "Other Credit Extensions"

Bank Term Funding Program (BTFP):

https://fred.stlouisfed.org/series/H41RESPPALDKNWW

Tool	Bank Term Funding Program (BTFP)	Up from 3/15, 1st week of program ($ billion)
3/15	$11.943 billion	$0 billion
3/22	$53.669 billion	$41.723 billion
3/29	$64.403 billion	$52.460 billion
3/31	$64.595 billion	$52.652 billion
4/5	$79.021 billion	$67.258 billion
4/12	$71.837 billion	$59.894 billion
4/19	$73.982 billion	$62.039 billion
4/26	$81.327 billion	$69.384 billion
5/3	$75.778 billion	$63.935 billion
5/10	$83.101 billion	$71.158 billion
5/17	$87.006 billion	$75.063 billion
5/24	$91.907 billion	$79.964 billion

​
https://www.reddit.com/Superstonk/comments/11prthd/federal_reserve_alert_federal_reserve_board/

• Association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit (see 12 CFR 201.4(a)) is eligible to borrow under the Program.
• Banks can borrow for up to one year, at a fixed rate for the term, pegged to the one-year overnight index swap rate plus 10 basis points.
• Banks have to post collateral (valued at par!).
• Any collateral has to be “owned by the borrower as of March 12, 2023."
• Eligible collateral includes any collateral eligible for purchase by the Federal Reserve Banks in open market operations.

Discount Window/Primary Credit:

https://fred.stlouisfed.org/series/WLCFLPCL

Tool	Discount Window	Down from 3/15 high
3/15	$152.853 billion	$0 billion
3/22	$110.248 billion	-$42.605 billion
3/29	$88.157 billion	-$64.696 billion
4/5	$69.705 billion	-$83.148 billion
4/12	$67.633 billion	-$85.22 billion
4/19	$69.925 billion	-$82.928 billion
4/26	$73.855 billion	-$78.998 billion
5/3	$.5345 billion	-$152.3185 billion
5/10	$.9323 billion	-$151.9207 billion
5/17	$.9048 billion	-$151.9482 billion
5/24	$.4211 billion	-$152.4319 billion

Primary Credit allows banks to borrow against collateral at the current federal funds rate:
Overview:

Federal Reserve lending to depository institutions (the “discount window”) plays an important role in supporting the liquidity and stability of the banking system and the effective implementation of monetary policy.
By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress. Thus, the discount window supports the smooth flow of credit to households and businesses. Providing liquidity in this way is one of the original purposes of the Federal Reserve System and other central banks around the world.

​

The "Primary Credit" program is the principal safety valve for ensuring adequate liquidity in the banking system. Primary credit is priced relative to the FOMC’s target range for the federal funds rate and is normally granted on a “no-questions-asked,” minimally administered basis. There are no restrictions on borrowers’ use of primary credit.

https://www.frbdiscountwindow.org/Pages/General-Information/Primary-and-Secondary-Lending-Programs.aspx
Examples of common borrowing situations:

• Tight money markets or undue market volatility
• Preventing an overnight overdraft
• Meeting a need for funding, including a short-term liquidity demand that may arise from unexpected deposit withdrawals or a spike in loan demand

The introduction of the primary credit program in 2003 marked a fundamental shift - from administration to pricing - in the Federal Reserve's approach to discount window lending. Notably, eligible depository institutions may obtain primary credit without exhausting or even seeking funds from alternative sources. Minimal administration of and restrictions on the use of primary credit makes it a reliable funding source. Being prepared to borrow primary credit enhances an institution's liquidity.

Notice how use of the Discount Window has PLUMMETED as BTFP has come in to play? BTFP offers slightly lower interest and longer terms. I wonder how many folks paid back their Discount Window loans with BTFP money?

“Other credit extensions”:

https://fred.stlouisfed.org/series/WLCFOCEL

Tool	Other Credit Extension	Up from 3/15, 1st week of program ($ billion)
3/15	$142.8 billion	$0 billion
3/22	$179.8 billion	$37 billion
3/29	$180.1 billion	$37.3 billion
4/5	$174.6 billion	$31.8 billion
4/12	$172.6 billion	$29.8 billion
4/19	$172.6 billion	$29.8 billion
4/26	$170.3 billion	$27.5 billion
5/3	$228.2 billion	$85.4 billion
5/10	$212.5 billion	$69.7billion
5/17	$208.5 billion	$65.7 billion
5/24	$192.6 billion	$49.8 billion

"Other credit extensions" includes loans that were extended to depository institutions established by the Federal Deposit Insurance Corporation (FDIC). The Federal Reserve Banks' loans to these depository institutions are secured by collateral and the FDIC provides repayment guarantees.
For example, $114 billion in face value Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities about to be liquidated 'gradual and orderly' with the 'aim to minimize the potential for any adverse impact on market functioning' by BlackRock.
How I understand this works:

• The FDIC created temporary banks to support the operations of the ones they have taken over.
• The FDIC did not have the money to operate these banks.
• The Fed is providing that in the form of a loan via "Other credit extensions".
• The FDIC is going to sell the taken over banks assets.
• Whatever the difference between the sale of the assets and the ultimate loan number is, will be the amount split up amongst all the remaining banks and applied as a special fee to make the Fed 'whole'.
• It can be argued the consumer will ultimately end up paying for this as banks look to pass this cost on in some way.

There has been an update on this piece recently:

Whatever the difference between the sale of the assets and the ultimate loan number is, will be the amount split up amongst all the remaining banks and applied as a special fee to make the Fed 'whole'.

FDIC Board of Directors Issues a Proposed Rule on Special Assessment Pursuant to Systemic Risk Determination of approximately $15.8 billion. It is estimated that a total of 113 banking organizations would be subject to the special assessment.
https://www.fdic.gov/news/fact-sheets/systemic-risk-determination-5-11-23.html
Funny, the usage this week appears to be down about as much as this assessment as well

What does all this borrowing look like for the banks? They sure as heck aren't getting funding from deposits...:

https://www.reddit.com/Superstonk/comments/13eme4d/bank_funding_during_the_current_monetary_policy/

Over the few weeks prior to the FDIC receivership announcements on March 10 and 12, the banking sector lost another approximately $450 billion. Throughout, the banking sector has offset the reduction in deposit funding with an increase in other forms of borrowing which has increased by $800 billion since the start of the tightening.
The right panel of the chart below summarizes the cumulative change in deposit funding by bank size category since the start of the tightening cycle through early March 2023 and then through the end of March. Until early March 2023, the decline in deposit funding lined up with bank size, consistent with the concentration of deposits in larger banks. Small banks lost no deposit funding prior to the events of late March. In terms of percentage decline, the outflows were roughly equal for regional, super-regional, and large banks at around 4 percent of total deposit funding:

https://preview.redd.it/zehzpnq8y92b1.png?width=572&format=png&auto=webp&s=a3c241c0b26a2092577cfff6a4e82bcd0e5961e6
The blue bar in the left panel above shows that the pattern changes following the run on SVB. The additional outflow is entirely concentrated in the segment of super-regional banks. In fact, most other size categories experience deposit inflows.
The right panel illustrates that outflows at super-regionals begin immediately after the failure of SVB and are mirrored by deposit inflows at large banks in the second week of March 2022.
Further, while deposit funding remains at a lower level throughout March for super-regional banks, the initially large inflows mostly reverse by the end of March. Notably, banks with less than $100 billion in assets were relatively unaffected.

However, during the most acute phase of banking stress in mid-March, other borrowings exceeded reductions in deposit balances, suggesting significant and widespread demand for precautionary liquidity. A substantial amount of liquidity was provided by the private markets, likely via the FHLB system, but primary credit and the Bank Term Funding Program (both summarized as Federal Reserve credit) were equally important.

https://preview.redd.it/naygb2qay92b1.png?width=557&format=png&auto=webp&s=6d140fd838be3bff4828536f6b31e6bd124cff8f

• Large banks increased borrowing the most, which is in line with deposit outflows being strongest for larger banks before March 2023.
• During March 2023, both super-regional and large banks increase their borrowings, with most increases being centered in the super-regional banks that faced the largest deposit outflows.
• Note, however, that not all size categories face deposit outflows but that all except the small banks increase their other borrowings.
• This pattern suggests demand for precautionary liquidity buffers across the banking system, not just among the most affected institutions:

https://preview.redd.it/yxsx8ewcy92b1.png?width=561&format=png&auto=webp&s=6b028207f0e0f43c51cfd724a8520dd853797fc2

• Banks have been replacing deposit outflows with the borrowing we have covered above.

TLDRS:

• Folks have pulled $1,006 billion in deposits since 4/13/2022
• Folks have pulled $538 billion in deposits since 2/22/2023
• Folks have pulled $16 billion in deposits since 4/12/2023
• Folks have added $29 billion in deposits 5/10-5/17
• The bank run takes a transitory break?
• With more and more money being pulled, where will collateral for short positions come from?!?...
  • As we have seen above, so far it has been the liquidity fairy...

https://preview.redd.it/843izxp8w92b1.png?width=610&format=png&auto=webp&s=d5b5d13ffb03052a8f31322a2cb15c3408374199

I just applied for the Nrewards card this morning and got approved so needless to say I'm super stoked. I know your probably thinking you're happy about a secured card??? And I am because I know it's only gonna go up from here. So for a little context I just got out of a terrible 15 yr marriage in 2020 and my credit tanked after everything was final and done. My ex decided to not only stay in a rental house that we had together and not pay the rent but also ran up the utility bills ( which were in my name ) simply because I wanted out of the marriage. So I am in the rebuilding stage again with my credit and I know this card will unsecure in no time and I will rebuild my credit again. I have been banking with Navy Fed since 2020 and I have just started building a relationship with them. I applied to no avail many times over the last two years to get credit which obviously got denied. So now fast forward now to 2023 and I have a used car loan which I refied a year ago, I just set up direct deposit a couple months ago ( I probably should have done that when I opened the account but I've been banking with USAA for the las 16 years so i figured if it's not broken don't fix it), I have two checking accounts and a savings account. I just took out my second pledge loan, have a save first and easy start certificate, and I just signed my 3 kids up for saving accounts. So I think I am on track to getting my credit together after 3 years of bad credit.

​
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Good afternoon Superstonk, HAPPY almost Friday! Resident jellyfish back with you to review the sweetheart programs from the liquidity fairy for banks--$285 billion left under the pillow this week!
I hope by the end of this post, it will be clear that Banks and Households are not experiencing this current economic environment the same way.
In my opinion, inflation is the big bad boogey man that has kicked off the need for all of this borrowing.

Let's get to it! This week's Fed balance sheet:

https://www.federalreserve.gov/releases/h41/20230525/

What we are reviewing from the balance sheet:

1. Bank Term Funding Program (BTFP)
2. Discount Window/Primary Credit
3. "Other Credit Extensions"

Bank Term Funding Program (BTFP):

https://fred.stlouisfed.org/series/H41RESPPALDKNWW

Tool	Bank Term Funding Program (BTFP)	Up from 3/15, 1st week of program ($ billion)
3/15	$11.943 billion	$0 billion
3/22	$53.669 billion	$41.723 billion
3/29	$64.403 billion	$52.460 billion
3/31	$64.595 billion	$52.652 billion
4/5	$79.021 billion	$67.258 billion
4/12	$71.837 billion	$59.894 billion
4/19	$73.982 billion	$62.039 billion
4/26	$81.327 billion	$69.384 billion
5/3	$75.778 billion	$63.935 billion
5/10	$83.101 billion	$71.158 billion
5/17	$87.006 billion	$75.063 billion
5/24	$91.907 billion	$79.964 billion

​
https://www.reddit.com/Superstonk/comments/11prthd/federal_reserve_alert_federal_reserve_board/

• Association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit (see 12 CFR 201.4(a)) is eligible to borrow under the Program.
• Banks can borrow for up to one year, at a fixed rate for the term, pegged to the one-year overnight index swap rate plus 10 basis points.
• Banks have to post collateral (valued at par!).
• Any collateral has to be “owned by the borrower as of March 12, 2023."
• Eligible collateral includes any collateral eligible for purchase by the Federal Reserve Banks in open market operations.

Discount Window/Primary Credit:

https://fred.stlouisfed.org/series/WLCFLPCL

Tool	Discount Window	Down from 3/15 high
3/15	$152.853 billion	$0 billion
3/22	$110.248 billion	-$42.605 billion
3/29	$88.157 billion	-$64.696 billion
4/5	$69.705 billion	-$83.148 billion
4/12	$67.633 billion	-$85.22 billion
4/19	$69.925 billion	-$82.928 billion
4/26	$73.855 billion	-$78.998 billion
5/3	$.5345 billion	-$152.3185 billion
5/10	$.9323 billion	-$151.9207 billion
5/17	$.9048 billion	-$151.9482 billion
5/24	$.4211 billion	-$152.4319 billion

Primary Credit allows banks to borrow against collateral at the current federal funds rate:
https://preview.redd.it/210e8v0x132b1.png?width=2492&format=png&auto=webp&s=60a8680434a28f3812d171536b75aade65ca9927
Overview:

Federal Reserve lending to depository institutions (the “discount window”) plays an important role in supporting the liquidity and stability of the banking system and the effective implementation of monetary policy.
By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress. Thus, the discount window supports the smooth flow of credit to households and businesses. Providing liquidity in this way is one of the original purposes of the Federal Reserve System and other central banks around the world.

​

The "Primary Credit" program is the principal safety valve for ensuring adequate liquidity in the banking system. Primary credit is priced relative to the FOMC’s target range for the federal funds rate and is normally granted on a “no-questions-asked,” minimally administered basis. There are no restrictions on borrowers’ use of primary credit.

https://www.frbdiscountwindow.org/Pages/General-Information/Primary-and-Secondary-Lending-Programs.aspx
Examples of common borrowing situations:

• Tight money markets or undue market volatility
• Preventing an overnight overdraft
• Meeting a need for funding, including a short-term liquidity demand that may arise from unexpected deposit withdrawals or a spike in loan demand

The introduction of the primary credit program in 2003 marked a fundamental shift - from administration to pricing - in the Federal Reserve's approach to discount window lending. Notably, eligible depository institutions may obtain primary credit without exhausting or even seeking funds from alternative sources. Minimal administration of and restrictions on the use of primary credit makes it a reliable funding source. Being prepared to borrow primary credit enhances an institution's liquidity.

Notice how use of the Discount Window has PLUMMETED as BTFP has come in to play? BTFP offers slightly lower interest and longer terms. I wonder how many folks paid back their Discount Window loans with BTFP money?

“Other credit extensions”:

https://fred.stlouisfed.org/series/WLCFOCEL

Tool	Other Credit Extension	Up from 3/15, 1st week of program ($ billion)
3/15	$142.8 billion	$0 billion
3/22	$179.8 billion	$37 billion
3/29	$180.1 billion	$37.3 billion
4/5	$174.6 billion	$31.8 billion
4/12	$172.6 billion	$29.8 billion
4/19	$172.6 billion	$29.8 billion
4/26	$170.3 billion	$27.5 billion
5/3	$228.2 billion	$85.4 billion
5/10	$212.5 billion	$69.7billion
5/17	$208.5 billion	$65.7 billion
5/24	$192.6 billion	$49.8 billion

"Other credit extensions" includes loans that were extended to depository institutions established by the Federal Deposit Insurance Corporation (FDIC). The Federal Reserve Banks' loans to these depository institutions are secured by collateral and the FDIC provides repayment guarantees.
For example, $114 billion in face value Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities about to be liquidated 'gradual and orderly' with the 'aim to minimize the potential for any adverse impact on market functioning' by BlackRock.
How I understand this works:

• The FDIC created temporary banks to support the operations of the ones they have taken over.
• The FDIC did not have the money to operate these banks.
• The Fed is providing that in the form of a loan via "Other credit extensions".
• The FDIC is going to sell the taken over banks assets.
• Whatever the difference between the sale of the assets and the ultimate loan number is, will be the amount split up amongst all the remaining banks and applied as a special fee to make the Fed 'whole'.
• It can be argued the consumer will ultimately end up paying for this as banks look to pass this cost on in some way.

There has been an update on this piece recently:

Whatever the difference between the sale of the assets and the ultimate loan number is, will be the amount split up amongst all the remaining banks and applied as a special fee to make the Fed 'whole'.

FDIC Board of Directors Issues a Proposed Rule on Special Assessment Pursuant to Systemic Risk Determination of approximately $15.8 billion. It is estimated that a total of 113 banking organizations would be subject to the special assessment.
https://www.fdic.gov/news/fact-sheets/systemic-risk-determination-5-11-23.html
Funny, the usage this week appears to be down about as much as this assessment as well

What does all this borrowing look like for the banks? They sure as heck aren't getting funding from deposits...:

https://www.reddit.com/Superstonk/comments/13eme4d/bank_funding_during_the_current_monetary_policy/

Over the few weeks prior to the FDIC receivership announcements on March 10 and 12, the banking sector lost another approximately $450 billion. Throughout, the banking sector has offset the reduction in deposit funding with an increase in other forms of borrowing which has increased by $800 billion since the start of the tightening.
The right panel of the chart below summarizes the cumulative change in deposit funding by bank size category since the start of the tightening cycle through early March 2023 and then through the end of March. Until early March 2023, the decline in deposit funding lined up with bank size, consistent with the concentration of deposits in larger banks. Small banks lost no deposit funding prior to the events of late March. In terms of percentage decline, the outflows were roughly equal for regional, super-regional, and large banks at around 4 percent of total deposit funding:

https://preview.redd.it/25k5i45t332b1.png?width=572&format=png&auto=webp&s=61e7ae9577768af4a5a4af079d0e3547f03d5d7f
The blue bar in the left panel above shows that the pattern changes following the run on SVB. The additional outflow is entirely concentrated in the segment of super-regional banks. In fact, most other size categories experience deposit inflows.
The right panel illustrates that outflows at super-regionals begin immediately after the failure of SVB and are mirrored by deposit inflows at large banks in the second week of March 2022.
Further, while deposit funding remains at a lower level throughout March for super-regional banks, the initially large inflows mostly reverse by the end of March. Notably, banks with less than $100 billion in assets were relatively unaffected.

However, during the most acute phase of banking stress in mid-March, other borrowings exceeded reductions in deposit balances, suggesting significant and widespread demand for precautionary liquidity. A substantial amount of liquidity was provided by the private markets, likely via the FHLB system, but primary credit and the Bank Term Funding Program (both summarized as Federal Reserve credit) were equally important.

https://preview.redd.it/4hvthp9v332b1.png?width=557&format=png&auto=webp&s=d90bfefe2aa9e26c7c5e11a675754c84eab900fb

• Large banks increased borrowing the most, which is in line with deposit outflows being strongest for larger banks before March 2023.
• During March 2023, both super-regional and large banks increase their borrowings, with most increases being centered in the super-regional banks that faced the largest deposit outflows.
• Note, however, that not all size categories face deposit outflows but that all except the small banks increase their other borrowings.
• This pattern suggests demand for precautionary liquidity buffers across the banking system, not just among the most affected institutions:

https://preview.redd.it/969g8d2x332b1.png?width=561&format=png&auto=webp&s=ccc34283cdf78bf47332c793946a21dd44172b72

• Banks have been replacing deposit outflows with the borrowing we have covered above.

What about Households???

Household borrowing has also skyrocketed!!!

'We' just get credit cards to borrow with at 29%+ vs the banks sweetheart programs:

From 1st quarter 2022 to 1st quarter 2023, total household debt has increased $1,205 billion to $17.05 trillion (+7.57%)--Mortgage balances ($864 billion), HELOC ($22 billion), Student loans ($14 billion), Auto loans ($93 billion), Credit Card debt ($145 billion), Other ($67 billion):
https://preview.redd.it/7sda6y87432b1.png?width=811&format=png&auto=webp&s=a09a2d860ca497dce2b2b7ac3a736d1e7c18ebe0

• Total household debt has risen by $148 billion, or 0.9 percent, to $17.05 trillion in the first quarter of 2023.
• Mortgage balances climbed by $121 billion and stood at $12.04 trillion at the end of March.
• Auto loans to $1.56 trillion.
• Student loans to $1.60 trillion.
• Credit Card debt $986 billion.

However, unlike the banks above, there are no fancy programs designed to keep households afloat in this inflating economy--and boy are households starting to feel it, especially in the areas like services and housing (that are BIG components of CPI--and way more 'sticky' than goods).
For example, on the housing front:
April 2023 Rental Report: The median asking rent was $1,734, up by $4 from last month and down by $43 from the peak but still $348 (25.1%) higher than the same time in 2019 (pre-pandemic)
https://preview.redd.it/j74lz5ka432b1.png?width=1000&format=png&auto=webp&s=92a4d5d6adaceacb8559bcf7eeac56a0196e5c6a
To try and further drive home the shaky ground households are on, let's revisit the Fed's Economic Well-being US Household 2022.

• "fewer adults reported having money left over after paying their expenses. 54% of adults said that their budgets had been affected "a lot" by price increases."
• "51% of adults reported that they reduced their savings in response to higher prices."
• The share of adults who reported that they would cover a $400 emergency expense using cash or its equivalent was 63 percent.

It is the younger generations starting to see itself break into delinquency now:
https://preview.redd.it/tlelzorc432b1.png?width=1135&format=png&auto=webp&s=d09718e25db2fd8d6b9ef0dabc3e8734dc1b563d

• Auto loans are above 3% delinquency for (30-39) and approaching 5% for (18-29)
• Credit Cards are above 6% delinquency for (30-39) and approaching 9% for (18-29)
• Student Loan delinquency is being artificially suppressed currently.
  • Speculation: when folks (18-29) and (30-39) have to pay Auto loans, Credit Card debt, and Student loans all at the same time, delinquencies across all 3 will jump bigly.
  • People will DIE being priced out of their lives in favor of raising interest rates to fight inflation for a problem the Fed created to begin with:

https://preview.redd.it/qoxckx0g432b1.png?width=733&format=png&auto=webp&s=a88e4373c63cfd46dd03ae573333ee81114aafff

TLDRS:

• Borrowing is still up--$285 billion from the liquidity fairy as of 5/24
  • Banks have access to sweetheart programs from the liquidity fairy.
  • Households are taking on debt that is literally killing them.
• Some fed governors are calling for 2 more rate hikes this year...

https://preview.redd.it/17rftuyx532b1.png?width=610&format=png&auto=webp&s=b289b112a08fcd3e611f7727fa1cd6160f22f440

Why couldn’t the roles be reversed in this situation and the woman look frustrated instead of the man ? Am I not catching on to something .

is anyone familiar with this message and how to potentially troubleshoot?