Sunday, May 24, 2009

No shortage of money (11)

While I'm waiting for lunch to be ready, I thought I would post this update (with data through April '09) of a chart showing consumer loans at all commercial banks. Lending did drop by about $11 billion in April versus March, but as the chart shows, the growth of lending over the past year has still been above average. I think this chart still supports the theme I started last September, to the effect that it is not the case that banks have stopped lending or that there has been some sort of massive credit implosion. The Fed has taken extraordinary steps to ensure that money is plentiful. What has been lacking is confidence, and that is now returning. We do see some modest reduction in bank lending of late, but I think that is fully consistent with the obvious attempts being made all over the world to deleverage. People and corporations are paying down debt and saving more, and governments are picking up the slack. There is nothing sinister going on.

6 comments:

Juan Pablo Neville said...

Deaar Scott: Unfortunately high economics are all Greek to me but I´ll take advantage of your blog to hava you know my political blog
viz: patriadelfuturo.blogspot.com
Love and kisses to that marvelous Norma and all your big family.Carlota & Ian.

bobo bobo said...

your chart omits the reduction in lending through non-bank lending, like securitization and junk bonds.

Scott Grannis said...

By definition, yes. But non-bank lending does not create money, as does bank lending. It only recirculates what banks have created. And as we know, money velocity has declined significantly. However, it is now increasing.

jpnmitchell said...

Hello Scott!

Any thoughts on the "impending doom" fears bubbling around the real estate loans market? I've seen several articles along this lines of this one:
http://www.nypost.com/seven/05242009/business/no_new_lease_on_trillions_in_debt_170812.htm

lately. Misa and I are gearing up for our move next month. I'm excited to try out the west coast for at least a few years!

j-p

Bernard said...

Your chart strikes fear into my heart. At a time when the risk profile of America(ns) has changed dramatically, and the future prospects more uncertain, the banks and government are doubling down in hopes more of the same will get us out of this.

It gives me no comfort to see backwards logic implemented with near precision...

Scott Grannis said...

jp: the commercial real estate market is in for trouble, but that is old news by now. Securities backed by commercial loans have been clobbered, suggesting the market fully expects massive bankruptcies. However, the prices have picked up significantly of late, suggesting something less than Armageddon.