Friday, February 22, 2013

No shortage of money

Bank lending to small and medium-sized businesses continues to expand, up 10.5% in the year ending Feb. 13th. This is a good sign that the economy continues to grow.


This measure of bank lending to businesses has been rising at double-digit rates for over two years. With banks absolutely flush with reserves, the only constraint on bank lending is a) willingness to lend and b) willingness to borrow. The fact that lending has been rising steadily for over two years is good evidence that banks are more willing to lend and businesses are more willing to borrow. Both suggest rising confidence, and that is the force that is underlying the slow but steady expansion of the economy. Not the Fed's QE, and not government spending. The growth we are seeing is the result of the private sector healing, not the public sector stimulating, despite what you may read in the papers. The Fed is facilitating the increased lending, by supplying ample amounts of reserves, but not driving it.

8 comments:

sgt.red.blue.red said...

Any place where I can find a survey of what the banks are actually charging in the way of mark-ups (spreads) over the underlyings, bank by bank?

Kurt said...

Any idea how this situation might affect non-bank lenders, such as BDCs?

bloodysnowman said...

Yup, I have to agree with you. And what do you think about kancelaria prawnicza, Wrocław?

Gloeschi said...

It is always nice to see someone still believes in fairy tales.

Dr William J McKibbin said...

What about consumer loans, which is the problem, not business loans...

Benjamin said...

The Fed's open-ended $85 billion a month QE program seems to getting some traction. Why the Fed has been so timid for so long is a question.

Scot Grannis says there is plenty of money out there. Maybe. Then why have seven of the last nine CPI reports been flat to down?

In the last nine months, we have been in deflation, as measured by the CPI.

Is that good place to be when still coming out of a recession?

sgt.red.blue.red said...

US CPI All Items up 1.1% yoy Jan 12 to Jan 13
Core up 1.9% yoy Jan 12 to Jan 13
Gold up 3.25% from its 52 week low hit last May, 2012.
Source: February 26 WSJ

Benjamin said...

Red-white-

Some are worried we will hit the next recession, and still have interest rates and inflation near zero...then what?

It's called Japan....