It was recently enough of indicators that the recession is about to happen:

  • Widening credit spreads
  • Decline in the rate of change of temporary service jobs
  • Decline of ISM down to 50
  • Sharp decline of imports
  • Sharp decline of short-term treasury yields

That’s more that enough to tell that the recession is about to start or already started, but the time accuracy is poor. It can give you the recession start day all the way from October to February. But I’d like to know exactly.

But now I finally got a final confirmation. Yes, it could be a year-end distortion, but I’d like to see the flow of short-term credit in the economy.

I’m adding together the two elephants in the room: commercial paper and total bank credit. Up to now the sharp decline in CP was compensated by bank credit. CP declined by $342 bln from July to Dec 5th. The bank credit increased by $514 bln from July to Dec 5th. So the total credit was growing.

Now the data for December. The CP declined by $5 bln from Dec 5th to 12. The bank credit also declined by $44 bln from 5th to 12. Ups, we’ve got the drain of $49 bln in the first week of December. Then the CP declined by another $54 bln from 12 to 19 and banking credit is not available yet, but you know, I suspect it’s not going to increase anymore.

I know, some people will say that Feds and ECB are adding money to the system. No, they are not, they are not adding anything.

That’s it, that was a final nail in the economy coffin and we are in recession for the last three weeks. Now let’s see how long it will take the stock market to catch up. I think it was especially stupid this time 🙂 Ah, as usual 🙂