So can someone please demonstrate to us how "this time it is going to be different" in terms of outcome for the US labor market given the "paradox of thrift" with bank reserves sitting idle at the Fed like we indicated in our previous conversation, with a broken transmission to the US economy, and questions surrounding fiscal stimulus which could potentially alleviate the situation (tax breaks for small companies anyone...)?"
But if you think that in this game of survival of the fittest, the prolonged impact has only impacted the greed of "Yield Skeksis" in a true Pareto efficient way, the QE induced rise in Bunker fuel prices has as well killed off the "velocity" of ships forcing them in essence to adjust their supply chain to survive:
Courtesy of ZIRP, our Yield Skeksis have seen:
-Falling Yields (in the Dark Crystal movie, originally, Gelflings were most ideal in essence extraction until they were exterminated and Podlings were used in their place, their lifeforce having a temporary effect on the drinker)
-Falling labor participation rate
After all our the greed of our "Yield Skeksis" knows no bound and if ones looks at CLO demand for AAA rated portions, one could see that the average spread on institutional loans was 377.6 basis points last month, down from 515 at the end of June 2012, as reported by Bloomberg and according to S&P Capital IQ Leveraged Commentary and Data.
Back in 2007 the tightest level was 243.3 basis points. On top of that and according to Bloomberg, borrowers obtained more than $88 billion in loans last month from non-bank lenders, exceeding the pre-crisis peak of $55 billion in April 2007 and more than tripling the $26.7 billion received in January, according to JPMorgan Chase & Co. More than 80 percent of the loans made this year were used to reduce borrowing costs or extend maturities.
On top of that ZIRP engineered by the Fed has managed to raise the level of corporate takeovers to 86.6 billion dollars in the US in February, the busiest month since July 2008 according to data compiled by Bloomberg.
Given the appetite of our Yield Skeksis it remains to be seen how low spread can go in order for them to replenish their level of "energy", but that's another credit bubble story, we think.
"It is greed to do all the talking but not to want to listen at all." - Democritus