Withering 'Green Shoots'

Mike Whitney, an interesting writer from the left website 'Counterpunch', writes concerning the current economy:

Credit is not flowing. In fact, credit is contracting. When credit
contracts in a consumer-driven economy, bad things happen. Business investment
drops, unemployment soars, earnings plunge, and GDP shrinks. The Fed has spent
more than a trillion dollars trying to get consumers to start borrowing again,
but without success. The country's credit engines are slowing to a crawl.
Fed
chairman Ben Bernanke has increased excess reserves in the banking system by
$800 billion, but lending is still slow. The banks are hoarding capital in order
to deal with the losses from toxic assets, non performing loans, and a $3.5
trillion commercial real estate bubble that's following housing into the toilet.
That's why the rate of bank failures is accelerating. 2010 will be even worse;
the list is growing. It's a bloodbath.

The standards for conventional loans have gotten tougher while the pool
of qualified credit-worthy borrowers has shrunk. That means less credit flowing
into the system. The shadow banking system has been hobbled by the freeze in
securitization and only provides a trifling portion of the credit needed to grow
the economy. Bernanke's initiatives haven't made a bit of difference.
Credit continues to shrivel.

The S&P 500 is up 50 per cent from its March lows. The financials,
retail, materials and industrials are leading the pack. It's a "Green Shoots"
bear market rally fueled by the Fed's Quantitative Easing (QE) which is forcing
liquidity into the financial system and lifting equities. The same thing
happened during the Great Depression. Stocks surged after 1929. Then the
prevailing trend took hold and dragged the Dow down 89 per cent from its earlier
highs. The S&P's March lows will be tested before the recession is over.
Systemwide deleveraging is ongoing. The economy is resetting at a lower rate of
activity.

No one is fooled by the fireworks on Wall Street. Consumer confidence
is still falling. Everyone knows things are bad. Everyone knows the mainstream
press is lying. The restaurants and malls are empty, the homeless shelters are
bulging, and even the big-box stores have stopped hiring. The only "green
shoots" are on Wall Street where everyone gets a handout from Uncle Sugar.