In the last two weeks of 2012, total loans and leases at commercial banks in the US surged by $82 bln. That was sharpest two week increase in four years. What is happening here? One likely explanation is that vendors and other recipients of government payments may be getting bank loans to cover day-to-day operating expenses as government payments slow to a crawl under the debt ceiling. This is resulting in a temporary surge in bank credit as seen here and it could, potentially, dampen some of the negative impact of the current fiscal stalemate. However, you see how government "saving" is now just translating into non-government dissaving (debt growth). Too bad the clowns in Washington don't understand this.
4 comments:
Great info, Mike.
With the govt still running deficits in the $1 trillion range, the public sector is doing its part. Time for the private sector to kick in. If this chart is true, it is extremely bullish.
I'd like to see that chart against a chart of net Fed inflows and outflows. How closely does the private increase match the public decrease in timing and volume?
@ Geoff
Not if the private sector is having to finance itself while it waits for govt to pay its bills. That's how CFO's of large companies deal with cash flow issues wrt to smaller suppliers and its how govt deals with vendors, even big ones. No one complains to the executive since they need those contracts. But they sure do complain to their congress critters about holding things up.
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