Friday, August 19, 2011
I keep updating this chart because it represents good news that is not getting enough attention, especially these days with the banking panic in Europe and the mad scramble for safety that has pushed 3-mo. T-bill yields to zero. The story here is that for almost one year now, banks have been increasing their lending to small and medium-sized businesses; over the past six months, C&I Loans have increased at a 9.1% annualized rate. That's fairly impressive, and it directly contradicts the notion that the economy is being depressed because everyone is still trying to deleverage. It's not that more loans are good per se, it's that more loans are prima facie evidence that risk-aversion is on the decline. After all, it takes someone willing to accept risk before you can have productive investments that grow the economy. Companies are more willing, on net, to leverage up, and banks are more willing, on net, to lend more. It further suggests that the stress that is punishing the Eurozone banking system is not spreading to the US. There is hope for the future.
Posted by Scott Grannis at 3:44 PM