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Friday, July 7, 2017
Warren Mosler — Credit check
"From bad to worse."
The Center of the Universe Credit check Warren Mosler
Warren keeps posting this stuff, but nominal credit outstanding in nearly all cases is at record levels and growing. It's just that the growth rate has slowed.
Yes Spending growth has to keep up with 'unspent income' growth for GDP growth. Last year's gdp growth was supported by last years growth of 'borrowing to spend' so if that support is reduced GDP is that much lower from that source of spending.
One unanswerable question is how much of that borrowing growth was for spending (on goods and services) and how much was just 'adding to savings' etc. That is, I don't know the propensity to spend of the growth of credit. But it does seem that bank credit expansion is running maybe 40 billion/mo less than last year.
And agreed this can be called 'monetarism' as loans create deposits, etc. with the larger point being deficit spending, private or public, is what offsets unspent income, etc.
They could also just be slightly discounting the NPV of their existing loan assets in response to the .75 increase in the risk free rate since December...
Warren keeps posting this stuff, but nominal credit outstanding in nearly all cases is at record levels and growing. It's just that the growth rate has slowed.
ReplyDeleteYes
ReplyDeleteSpending growth has to keep up with 'unspent income' growth for GDP growth.
Last year's gdp growth was supported by last years growth of 'borrowing to spend'
so if that support is reduced GDP is that much lower from that source of spending.
One unanswerable question is how much of that borrowing growth was for spending (on goods and services) and how much was just 'adding to savings' etc. That is, I don't know the propensity to spend of the growth of credit. But it does seem that bank credit expansion is running maybe 40 billion/mo less than last year.
And agreed this can be called 'monetarism' as loans create deposits, etc. with the larger point being deficit spending, private or public, is what offsets unspent income, etc.
They could also just be slightly discounting the NPV of their existing loan assets in response to the .75 increase in the risk free rate since December...
ReplyDeletehttp://people.stern.nyu.edu/adamodar/pdfiles/papers/riskfreerate.pdf
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteHi Matt,
ReplyDeleteUnless there's been a recent change banks carry their performing loans at book value.
I'll try to check into it Warren...
ReplyDelete