ok i'm answering my mailbag today. Most pertinent Q is do we really need a crazy fed chair to spark a mood change and accelerate bank lending growth and take us closer to the embrace of inflation? Haven't our govts just done it for us??
The govt guarantees of bank lending we are seeing in so many countries (ie Europe, uk, japan, US, etc) is driving bank lending growth to a level we haven’t seen in decades.
Isn’t the mood changing?
Isn’t the mood changing?
if commercial bank lending is surging as you say then people please post me some charts because for sure this would be tangible evidence of change. Bank lending makes high powered money a reality.
i haven't seen those lending charts. i have great envy to see them. For now i remain wary. An alternative thesis is that savings surged during confinement. People spent less. Accordingly bank deposits surged. Deposits are the liabilities of the banking system. Torschlusspanik?
Liabilities need asset offsets. The choice is binary: Ts or loans. Some argue that enormous deficit financing will crowd out you and me - that the banks will offset deposit liabilities with Ts.
I believe there was a v important change in regulation in march allowing banks to hold Ts without setting aside rainy day capital - infinite leverage to the US gov. I'm sure others can confirm.
We've got to get organized. Let's march downtown and demand reciprocity. It's bank cap regulation that is stifling loan growth. Banks have to set aside way too much rainy day capital to lend to you and me.
some say we are debt sated - not me. I've said before- i would borrow more if they would reinstate interest-only bullet loans. But the banking regulator has done away with that by insisting on too much capital and with little leverage + low nominal rates HH gets no loan...
modern life is rubbish...what's the point of zero rates if loans are amortized and you need to repay 5 to 10pc of the liability each year? what's the point of QE if it doesn't encourage bank lending?
That's why i say we need crazy guys. at least they are transparently crazy; unlike our balanced rational elite who continue to do the dumbest contradictory nonsense in broad daylight hidden by the quackology of finance
