The motivating idea behind the various U.S. bank rescue measures was to do whatever it would take to get bank loans to the private sector growing again. That mission remains distinctly unaccomplished.
Despite all the policy machinations — from TARP capital infusions to outright asset purchases, temporary lending facilities, a near-zero fed funds rate and various guarantees on bank liabilities — loans outstanding in the commercial banking system have continued to contract. Instead, banks have preferred to accumulate securities rather than make new loans. Even those purchases have flattened in recent months as banks are back to hoarding more excess reserves.
We won’t argue with the counterfactual — without these measures, the contraction in bank loans outstanding would no doubt have been much more dramatic, as an Austrian-style simplification of balance sheets would have naturally gathered momentum following the Lehman Bros. bankruptcy. But the reality is neither the household nor business sector is eager to add to its debt, and bank loan officers are still battling rising loan loss recognition from the last private credit bulge. This is much as we anticipated — the private sector has hunkered down, is spending less money than it is earning and is paying down or liquidating existing debt loads.
Rob Parenteau, the former editor of the world-famous Richebächer Letter.
It makes sense for banks to be hoarding capital while they sort out their balance sheets. The idea that they want to lend when the regulators are climbing over their books looking for trouble makes little sense. As noted the consumers and businesses are not all that interested in borrowing unless they have pressing problems or the capital comes with few strings.
It will be a while before we reach the ‘new normal’.
To allow exports of oil or to not allow exports of oil? That has become a very important question. Today Jody Chudley takes a look at that and three ways to invest around political thumb sucking…
As the business publication Quartz reports, "Cisco projects video to represent 71% of all mobile data traffic by 2019, up from about 55% last year, and representing the bulk of mobile traffic growth."
Bill Bonner writes with his mouth wide open… staggered by the shabby immensity of it… a tear forming in the corner of his eye. Yes, he's looking at how the US economy, money and government have changed since President Nixon ended the gold-backed monetary system in 1971.
There may be a long trip to India in your future if you have hepatitis C. That’s because the Indian Patent Office recently rejected Gilead Sciences’ application for a patent on Sovaldi. You may remember Sovaldi, the nearly miraculous “cure” for hep C that was approved by the FDA a little more than a year ago.
Use what analogy you will: a car, a clock, a chemistry experiment... the point remains that the Fed believes it can control the economy. Indeed the Fed will stop at nothing to realize the goals of its dual mandate" to maximize job growth and maintain price stability. But, as Jim Rickards expalins, that conceit always ends in disaster. Read on...
The median forecast of the 76 economists Bloomberg surveyed undershot the actual total by 75,000. And the highest estimate was still 49,000 short. Not even close guys. Try again next month.