$5.5 trillion

Good morning.

Motley Fool has a link to Rep. Kanjorski (D-PA) talking about how the US also came within a few hours of a completely collapsed banking system. (eta: also, see comments.) You might recall that Rep. Sherman (D-CA) stated on the record (I linked to video at the time) that Congress was threatened with Martial Law by the Bush administration if they didn't pass the US$700B bailout bill; this link doesn't include that, but does include the estimate of a US$5.5T banking system run. (Link courtesy ginmar, here.)

China wants "guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank." That's neat. Brad Setzer takes a look at China's declining exports and notes that the overall Chinese surplus is still rising, as Chinese imports fall off a cliff. He's quite worried about China's domestic economy. Also, he does not expect the US trade deficit to fall to 2.5%-3% of GDP, as some are suggesting.

Britain is ready to print as soon as next month. Tim Horton's and Cold Stone Creamery to join coronary-inducing forces, but the economy is still Code Blue.

Dr. Roubini is making the rounds calling for bank nationalisation. Business Insider suggests that Sec. Geithner is trying to keep things propped up long enough so that nationalisation can happen without triggering a generalised banking system run. The problem with this theory is that it requires a Grand Plan^TM in which I do not typically believe. Ben Bernanke certainly thinks he's doing a good job. Bank of America strategist Richard Bernstein disagrees, advising not to buy shares in the banking sector, this won't work. Minyanville's Bill Feingold and the Wall Street Journal both lend a sympathetic idea to monkeying around with the idea of mark-to-market. I link this not because I support that idea, but because I don't, and because "changing the definition of words to make things sound better" doesn't change reality.

Something's going on in metals, at large scale. Dry bulk shipping has picked up across all ship classes now - well above historical average in dollar terms. Gold inventories are soaring, and these curves never end well for people buying in late. I don't know what's up. (Graph pointer courtesy cow.) And, interestingly, we're well below pre-blow-up averages that I an reach normalised against both gold and copper, the only metals this charts against. China has talked openly about stockpiling raw materials, so some people think it's all just that - China making a bunch of major buys all at once. Asia Online Maritime News reports they expect this mini-boom to fade in the immediate future.

The government reported an unexpected +1% in January sales, in stark contrast to private-sector reports. That number, however, is seasonally-adjusted, and most people think that the seasonal-adjustment mechanism failed to handle the November-December downturn correctly. November and December sales figures were both revised downward in this same report. Also, retail sales were down 10.6% year-to-year; that's 7.4% of GDP, if the old "70% of GDP" adage holds. Calculated Risk has a cute graph.

The spin you're hearing on the radio about the weekly new claims job report is that new claims dropped. Yes, by 7,000. What you're not hearing is that it was expected to drop by significantly more, and this is a "miss" to the bad side, not the good side. Continuing unemployment claims set new records. Take out seasonal adjustments, and first-time claims came in higher outright, at 706,267.

Finally, Mish talks about the three-generation wealth cycle here, following more comments by Steve Ballmer about the current inflection point in the economic system.

That's all for now; good luck.