Total Loans and Leases at commercial banks
Total loans and leases at commercial banks almost positive on the year now. Loans have increased by $64 bln since March. JP Morgan recently reported an expanding loan book.
This could really help the economy in the second half; maybe even save it from the deflationary effects of gov't spending cuts. (Barring any serious external shock, of course).
10 comments:
I'm not sure I believe anything JPM says. They are well aware they are getting criticism for not making loans and I'm sure there are ways to inflate the loan count (and bankers out there?). If you want to see what a political creature JPM is, just go to their personal or business website. It comes across as one hugely diverse charity instead of the TBTF bank taking advantage of low rates to coin money. It's a website that Orwell would have understood perfectly.
The July 14 Graph from Wray was all doom and gloom on the credit front, now this graph is going the other way. *scratches head*
Randy's chart shows a 20 year picture. This chart is just the squiggle at the end of it.
How does the regulatory restraint re: Dodd-Frank implementation and all the rest play into this?
Even if true and the trend continued, it would likely mean a worse hardship in a few years. If the net private sector starts going into debt and successfully off-sets government spending decreases, keeping aggregate demand up and the economy gets better, I think that would tend to make the long term situation worse.
For example, if it played-out like that, he powers that be will likely interrupt that situation as proof that spending cuts work and then go for even more of them and then as an indebted private sector becomes unsustainable, we will crash even harder then if aggregate demand just went down now with spending cuts and policy makers hopefully learn their folly early instead of getting a false sense of security from growing private debt.
Thoughts?
Crake:
That's right. The ability of the private sector to take on debt is limited by income and income growth. So, you're right, it would eventually come to an end if debt levels rose high enough and if the government continued to cut back, thereby reducing incomes. However, in the meantime a debt-fueled consumption upturn could boost the economy and induce hiring, at least for a while.
Mike,
And then tax receipts would increase, and while that would be a restraint on aggregate demand, the increase would come from higher income earners, who tend to save, so maybe it will not hurt aggregate demand that bad (plus by reducing their savings, it might retard money going into alternative investments like commodities, which would reduce prices of this inputs) and it would cause the deficit to shrink, which hopefully would cause the debt paranoia to wane.
Ah a silver lining : )
Austrians are always shouting about letting a recession cure malinvestment, risking a deeper recession or even depression and debt deflation kicks in. The MMT version of this is let a recession after a financial crisis cure excessive domestic private debt, especially household debt, by offsetting the increased saving desire — delvering is saving — with corresponding deficits.
Tom,
Sounds like MMT advocates want us to live as a civilization, whereas Austrians want us to entertain jungle law.
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