Commercial banking. Commercial banking is what gives rise to any advanced economy. In spite of popular misguided hatred for bankers, without commercial banking, you would be living at a bare subsistence. Nothing that you know would exist — the Internet, smart phones, cars, pain killers, sports stadiums, TV.
A hidden aspect to the economy are the many transactions commercial bankers handle, which transfer checkable deposits between two parties — someone, a firm or government agency.
An automated clearing house (ACH) is a bank clearing house uses computers for inter-bank settlement of electronic credit and debit transfers of depository institutions. The Federal Reserve operates FedACH, the automated clearing house service of the regional reserve banks of the Federal Reserve.
Until True Commercial Clearings begin to rise, no one should expect the economy to be sound. Until True Government Clearings begin to rise steadily, no one should believe an expansion is under way.
Here is what FedACH clearings look like.
Here is what True FedACH government clearings look like.
And here is what True GDP looks like compared to True FedACH commercial clearings.
First, here is a general observation. During GDP growth, commercial clearings and government clearings grow. The government clearings growth rate far outstrip commercial clearings growth rate during true GDP growth as political coffers get fat from unearned shares of profits, otherwise known as taxes.
Now, let's look at the true clearings during true GDP growth years and decline years.
Beginning Q4 1988 off Reagan Low of Q3 1987 to Bush 1 Peak (Q3 1990), True GDP grew 5.9%, growing at a yearly rate of 2.91%. True Commercial Clearings grew 18.2% growing at a yearly rate of 8.7% and True Government Clearings grew 40.6% growing at a yearly rate of 18.6%.
From the Clinton Low to Clinton Peak (Q1 1994 to Q4 2000), True GDP grew 51.4%, growing at a yearly rate of 6.1%. True Commercial Clearings grew 81.8% growing at a yearly rate of 8.9% and True Government Clearings grew 191.9% growing at a yearly rate of 16.5%.
The Clinton Good Times, from the Clinton Low to Clinton Peak truly were good times for wage earning Americans. Back in EVERYBODY'S WORKING FOR THE WEEKEND, FOR LESS, I showed that during the Clinton Low to Clinton Peak, Americans experienced True Private Wage Income growth for any stretch since the years between Johnson and Reagan.
In S&P 500 AND THE DOW JONES INDUSTRIAL AVERAGE HIT ALL-TIME LIES!, I showed how the True S&P 500 hit the all-time high back on August 28, 2000, when the S&P closed at $313.35 in True Dollars™. Between December 5, 1994, and the all-time high hit on August 28, 2000, the True S&P 500 grew 261.9% growing at a blistering rate of 25% a year. Likely surprising to many, over those 2,094 days, or 5 years, eight months and 24 days, cash and deposits fell -6%, falling at an annual rate of -1.1% and leaving cash and deposits $69.7 billion less than before the start of the run.
In, True State of the Union: Wage-Earners' Income and Taxes, I show during that 1994 and 2000 stretch, as a percent of GDP, true private wages rose. As well, true average income rose, employment incidence rose and hit an all-time peak, and true individual taxes as a percent of GDP rose, nearing the all-time high.
Contrast the Clinton Good Times with the Bush 2 Low to Bush 2 Peak between Q3 2003 to Q4 2007. During the Bush 2 Illusion Economy, fueled by the Greenspan-Bernanke Credit Bubble, the biggest inflation in world history, True GDP grew 17.9%, growing at a yearly rate of 3.5%, a bit more than half the rate of the Clinton Good Times. True Commercial Clearings barely grew 2.8% growing at a yearly snail's pace of 0.6% and True Government Clearings grew 42.1% growing at a yearly rate of 7.7%.
After the blow up of the Greenspan-Bernanke Inflation of the Bush 2 Illusion Economy, a two-part decline hit. From Bush 2 Peak to the Obama Greenshoots (Q4 2008 to Q3 2009), GDP fell -18% falling at a yearly rate of -9.5%. True Commercial Clearings fell -15.9% falling at a yearly rate of -8.3% and True Government Clearings grew -17.4%% falling at a yearly rate of -9.1%.
And then the full on Obama Disaster (Q4 2009 to Q1 2014) hit thanks to Obama and his Congresses. During the Obama Disaster, True GDP has shrunk -29.6%, shrinking at a yearly rate of -7.5%. True Commercial Clearings have shrunk -25.6%, shrinking at a yearly rate of -6.4% and True Government Clearings have shrunk -37.9%, shrinking at a yearly rate of -10.0%.
Overall, since the Bush 2 Illusion Economy Peak through the Obama years and Obama disaster, True GDP has shrunk -42.2%, shrinking at a yearly rate of -8.1%. True Commercial Clearings have shrunk -37.9%, shrinking at a yearly rate of -7.1% and in lockstep with True GDP, True Government Clearings have shrunk -4.2%, shrinking at a yearly rate of -8.1%.
The one year picture looks alike. True GDP has fallen -7.0%. True Commercial Clearings have fallen -7.5%. True Government Clearings have fallen -1.6%. Again, this adds to hope.