Friday, August 5, 2011

Bank lending update

Commercial and Industrial Loans outstanding at all U.S. banks (a proxy for bank lending to small and medium-sized businesses) continue to rise: up at a 6.6% annualized rate year to date, and up at a 7.8% annualized rate over the past six months. This suggests a) an increased willingness on the part of banks to lend (i.e., less stringent credit standards), b) an increased willingness on the part of businesses to borrow (i.e., less deleveraging), and/or c) an increased willingness on the part of all parties to assume greater risk. Whatever the case, this is good news for the economy, since a general aversion to risk has contributed to the slow pace of this recovery.


Bill said...

Thoughts on the S&P downgrade?

William said...

Most large investors knew the U. S. wasn't truly AAA.

How could the U. S. be AAA with debt increasing by $1+ Trillion each year and with its dysfunctional government?

Jeff said...

I think that some financial institutions are required by law to hold a certain percentage of aaa paper. Is this true and what happens Monday morning when all those t-bills no longer qualify?

William said...
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William said...

I heard on Bloomberg a couple days ago that at least 2 of the 3 rating agencies must downgrade the U. S. before U. S. debt can't be considered qualified to be held as AAA paper.

Actually, a Chinese rating agency downgraded U. S. debt a month or so ago.

Glad that I refinanced my mortgage yesterday ;~)

McKibbinUSA said...

Lending to small businesses needs to increase by 200-300% to be meaningful...

Benjamin Cole said...

Small business must borrow on collateral.

Your employees, you and your equipment are nearly worthless.

That leaves real estate. When we get some upward motion in commercial real estate, then we will see more small biz loans.

Right now, inflation is so bad that commercial real estate is inflating by about minus five percent a year.

Jim said...

This is going to be bad. Until the next 2012 election will confidence be restored. As I said before, we are paying for voting for a freshman senator with no business and little legislative experience. Let's hope Americans are a more sensible next time.

Mark Gerber said...

There's a huge elephant in the room, as objectively identified by the "State of the Union's Finances" linked below, and finally a major financial organization, S&P, acknowledged its existance! Maybe our nation can finally start to have an honest discussion about this demographic/debt timebomb.

Mark Gerber said...

A shorted link for my previous post

Benjamin Cole said...

And how about $10 trillion in the next 10 years for Defense, Honeland Security and the VA?

And who is going to invade the USA?

And at the end of those 10 years, I assure you of one thing: We will told about mounting threats globally, that eternal vigilance is needed, that we are having difficulty retaining soldiers, that our equipment is too old and falling apart....

Like the War on Poverty, the War on Terror will last forever, and cost trillions.

McKibbinUSA said...

Benjamin, the military industrial complex is central to our nation's fiscal woes -- for now, the defense establishment has had a pass from those challenges, along with Federal workers, "too big to fail" banks, and unionized automobile manufacturing, and teachers -- everyone else is unlucky...

septizoniom said...

these posts mr grannis are boring, trite and senseless. it's officially time to drop your cape of captain cheerleader.

Jeff said...

Um, excuse me. National defense is actually one of the things listed in the constitution that the Federal government is actually supposed to do!

After watching the Sunday shows, there is no hope. The tea party is to blame for the downgrade was the common theme.

The country is simply not ready to get off the drug of massive deficit spending.

Greece, here we come.

William said...

The United States of America I am proud to say has the means to solve its problems. What is lacking is the Political Will - and it has been for 2 + decades which is why the problems have gotten to be so BIG. Our present problems are de minimus compared with World War II.

How did we get through WW II - everyone sacrificed! Think of it - everything was rationed: gasoline, milk, eggs, butter - Oh, butter forget it. What was available was white margarine; you added a yellow coloring to make it resemble the real thing.

Celebrations, parties, gifts, going out to dinner, new cars - forget it. If you were lucky, you might get cake for your birthday and maybe a movie now and then. That is when women of all ages first joined the civilian work force in numbers.

Now, no one wants to sacrifice anything - especially their sacred low taxes at a time when U. S. tax rate are the lowest in 50 years.

Give me an f------ break! How stupid can the citizens of this country be. They would rather let this country go down the tube than pay a little more in taxes - not much, just a little.

Sure government is wasteful and duplication needs to be eliminated - including some of the 1200 agencies in Homeland Security - and programs made more efficient. And maybe we could stop engaging in wars of choice.

In my opinion, the only possible reason citizens find it abhorrent to go back to the tax levels of the roaring 1990s is that they are so materialistic they just need to purchase more and more. If individuals could control their OWN spending, they would have some money to pay a LITTLE more in taxes. Instead for the most part, American have become greedy little bastards: they want everything and they want it now. The country be damned.


ChronicleSmith said...

Why is the U.S. dollar rising against other currencies -- given the S & P downgrade?

Benjamin Cole said...
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Benjamin Cole said...


Actually, our Founding Fathers detested and loathed the idea of standing militaries. Some refused to sign the Constitution as it did not contain an explicit ban on standing militaries, such as George Mason.

The language about right to bear arms and form militias was to encourage citizen armies, and not a federal standing military.

Additionally, there is an explicit ban in the Constitution on funding the military for more than two years at a time--implying the Congress has the right and obligation to de-fund, or radically reduce the military when it is no longer needed.

Actually, America's right-wing used to be far less militaristic, so much so that Republicans nearly kept this nation out of WWII.

Even after Germany invaded France (and many nations before that), the Republicans would not let FDR go to war. Even after Japan bombed Pearl Harbor, the Republicans did not want to enter the European theater. Germany unilaterally declared war on the USA after Pearl Harbor, and we were in.

The GOP used to refer to WWII and Korea as "Democrat wars."

After WWII, the Republican Congress nearly dismantled our military, so much so that Truman could not find enough men and equipment to fight a limited war in Korea. Eisenhower pulled out of Korea as quickly as he could, stating that the USA should never get in a land war in Asia. He was a very smart general.

It was only in the long Cold War that the idea of a permanently mobilized military emerged, and it only become a right-wing or Republican fetish after many rural districts switched to the GOP from the D-party. The Cold War is over, but once enlarged, federal agencies never shrink--and they bring federal lard to Congressional districts.

After 50 years of ossification and bloat, we now spend $1 trillion annually on defense, Homeland Security and the VA, and that excludes more hundreds of billions to pay for funds borrowed to fight in Iraqistan.

Ron Paul is one of the very few leaders in either party willing to radically curtail the ongoing federal military boondoggle. Usually Congressmen with defense pants and bases in their districts get on the military appropriations and authorization committees. This is a system designed to bloat.

As a taxpayer, all you can do is have your income confiscated for this ongoing travesty. The money is taken out of the jobs- and wealth-creating private sector and put into federal coprolite.

mmanagedaccounts said...

William---this is not the Roarin' 90s.If it was some tax hikes might not matter. It was not higher taxes in the 1990s that gave us a balanced budget. It was a roaring economy. The higher tax rates did not cause the roaring economy. And don't forget that roaring economy led to a bubble, a crash and the beginning of a series of perpetual crises. In some respects, we're still paying for the 90s, aren't we?

Jeff said...

William. What a joke. Sacrifice today means I pay more taxes and the government spends it. To compare the call to sacrifice today with the sacrifices made during WWII is just nonsense.

We give governments 46% of our GDP. I will frikkin rant all I want. All you do is blast those that believe this country was founded upon liberty--including the liberty to keep what you earn. Sacrifice my over taxed butt!

Jeff said...

Benjamin, you really want to dismantle the military? We'd all be speaking Arabic tomorrow.

Thanks for the history lesson but you are dead wrong. Today's threats are vastly different than 200 years ago. I want the strongest, badest, most capable defense force in the world. Twice as strong as the next.

Having a capable military is not the same as nation building which I am against.

Tell china not to have a standing army. They are actually building the most advanced fighters in the world while Obama cancelled production of ours.

Ron Paul is right about a lot. But for you to suggest we should not have a standing army is simply idiocy.

Benjamin Cole said...


If some time in the future it appeared there an Arab invasionary force in the making, then I would support mobilization.

If China assembles a standing military the likes of the Soviet Union, then sadly we must also waste our resources.

Neither is even close to happening. In the private sector, you seize opportunities to reduce costs. In the federal sector?


We can mobilize later, if need be. A simple nuclear deterrent (that we have too much of already), and a submarine Navy, is probably adequate to prevent invasion.

(Submarines are very hard to track, even the old technology diesel-electrics with sonar padding. An invasionary force would be very easy to sink before it hit our coast. In fact, our Seventh Fleet is very easy to sink, either by missile or torpedo. Admiral Paul Cohen proposed an all-submarine Navy almost 40 years ago, and the arguments against surface ships have grown stronger with each passing year. But it is like trying to get rid of the food Stamp program--when was the last time you saw a bona fide emaciated person in the USA? But we have the food stamp program).

John said...

Barry Ritholtz raised the question that the downgrade was retaliatory. Dodd-Frank diminishes the roll of the rating agencies in how the SEC would do its job. Obviously, the rating agencies suffered loss of credibility in 2008.

Jeff said...


You started with "no standing army". Now at least you're buying submarines.

But I don't think there is a case in recorded history of a sub shooting down a plane. So could we buy some airplanes too?

Then, of coarse, we are going to need some bases, support personal, logistics, supplies, munitions, etc.

Oh, and we should take care of thse wounded in battle, so medics, hospitals, etc. Plus a VA.

What about special forces? Could they be "mobilized" for missions like Bin Laden? How quickly?

I supposed we could have mobilized for Haiti, the Gulf War, Afganistan (2001), etc.

Could we at least have 1 carrier group to project sufficient force in a crisis?

Here is a chart of military spending as a % of GDP versus entitlements as a % of GDP. Tell me which is out of control!

Benjamin Cole said...

Many times I have stated a need to trim entitlements, which, btw, are largely financed by payroll taxes.

As to having a military, the sword cuts two ways. The fantastically expensive Vietnam, Afghanistan and Iraq occupations are happened as a civilian President thought it would be nice to re-arrange the affairs of another nation through long-term occupation.

Total bills from those utopian, idealistic efforts? Hard to say, but maybe $5 trillion. More if you count debt payments.

About one-half of our outstanding debt.