Monday, October 27, 2014

Bank Credit 2014 3Q

Here is an updated graph of bank credit at all commercial banks.  Credit had been growing healthily between QEs, but then growth declined during QE3, and then started to recover again as QE3 was tapered.  But, as the taper has come to an end, growth rates in bank credit have moderated.  I attribute much of this to the fact that QE3 was ended before the housing market was fully recovered.  Partly this is a function of household real estate leverage and partly this is a function of pro-cyclical regulatory sentiment.  I hope the recent signals from FHFA that regulatory liabilities will be reduced soon help to alleviate risks here.

PS.  Whether commercial real estate has stronger legs than residential, or whether it is just lagging the residential trend is a question, I suppose.  I suspect that there are less frictions from distressed properties, so that it might more easily see sustained growth.  I have noticed in Arizona that many corner lots at major intersections, which have always been saved for commercial development, are now being filled in with residential developments.


  1. TravisV here.

    Latest on the ECB below. Who knows, maybe France, Spain and Italy are starting to support Draghi more behind closed doors against Germany's tight money stubbornness.......

  2. TravisV here.

    Scott Grannis is clearly very sharp so I am amazed that he thinks there's a lot more risk of too-high inflation than too-low inflation.......

    “Members of the FOMC are overly-impressed with their ability to “guide” the U.S. economy, and overly-concerned with the relatively low level of current inflation……One key source of risk going forward is that, because of the Fed’s hubris, FOMC members may fail to react in a timely fashion to signs of improving confidence and declining money demand: a failure to reverse QE in response to a decline in the demand for safe assets could result in an unwelcome abundance of money and higher inflation. At today’s levels, Treasury yields offer hardly any cushion at all for this risk and are thus very unattractive. Deflation, contrary to widespread claims in the punditocracy, is not a threat to growth, and is not a black hole that captures and annihilates slow-growing economies.”

    1. I don't know. It seems like it is just one risk among several that he mentions. I'm not sure I disagree with that. Is there any historical precedent for managing reserves with the precision the Fed is setting itself up for?

  3. TravisV here.

    Wonderful day today for the global economy! Virtually all equities were substantially higher today: Russell 2000 up 2.9%, major oil stocks, Germany, Sweden (Riksbank news), Shanghai composite.

    This has GOT to result in higher 5-year inflation breakevens the next couple days........

  4. TravisV here.

    With the Riskbank news today, I think Sweden's iShares ETF looks interesting.........

    Ambrose Evans-Pritchard: "The Riksbank – arguably the world’s oldest central bank, with a tradition of bold monetary experiments – carried out a dramatic volte-face in July when it slashed rates and gave up trying to restrain asset prices. Governor Ingves was outvoted in what amounted to a policy mutiny.

    The shift over recent months is a triumph for Mr Svensson………”

  5. TravisV here.

    Has Zero Hedge’s Tyler Durden changed his mind and decided that deflation, not hyperinflation, is in the U.S.’s future?

    I don’t understand, does he have a coherent point of view?