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Bank Loans Take a Dive: It’s the Economy, Stupid

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by Dave Kranzler, Investment Research Dynamics:

I am compelled to correct a report posted on Zerohedge about the cliff-dive going on in commercial, industrial and consumer loans. The report in ZH suggested the plunge is connected to two possibilities: 1) this one from a Wall Street sleazebag from Barclays: “it is possible that companies have shifted from the loan to the bond market, and are selling more bonds to lock in cheap financing before rates rise, while not encumbering assets with issuing unsecured debt;” and 2) political uncertainty connected to Trump.

The first possibility could have some small amount of legitimacy except that if you parse through all the data available at the Fed, you’ll see that bank credit has plunged across the entire spectrum of U.S. business (I used size of loan as the proxy). Smaller businesses do not have access to public credit markets and thus the first explanation is the typical apology for a negative economic report that we would expect from a Wall Street con-artist. The second possibility is part of the anti-Trump narrative found in the fake news reports coming from the ignorant.

“It’s The Economy, Stupid”

That quote was created by James Carville as one of Bill Clinton’s campaign slogans in 1992. Those words ring even truer today. A primary example is the restaurant industry numbers discussed above. “Hope” and “confidence” do not generate economic activity. And “hope” is not a valid investment strategy. A better guide to what’s happening to economic activity on Main Street is to see what banks are doing with their lending capital. I borrowed the two graphs below from the @DonDraperClone Twitter feed :

Commercial bank lending is a great barometer of economic activity. The top graph above shows the year over year percentage change in commercial and industrial loans for all commercial banks. You can see that the rate of bank lending to businesses is falling doing a cliff-dive. These are primarily senior secured and revolving credit loans that sit at the top of the capital structure. If bank lending is slowing down like this, it means two things: 1) the ability of businesses to repay new loans is declining and 2) the asset values used to secure new loans will likely decline. In fact, it is highly probable that the tightening of credit by the banks is a directive from the Fed. Yes, the Fed. Despite its public commentary suggesting otherwise, the Fed knows as well as anyone that the economy is tanking. This is why the Fed can’t hike rates up to a level that would bring real interest rates up to at a “neutral” level (using a real price inflation measure, Fed Funds needs to be reset to at least 6%, and likely higher, to get the real rate of interest up to zero).

The only reason the Fed might “nudge” interest rates higher next week is for credibility purposes. Everyone knows inflation is escalating, which makes it difficult for the Fed to keep interest rates so close to zero. In addition, a rate hike now, even though it will be insignificant in magnitude, will give the Fed room to take rates back to zero when the public and Congress begin to scream about economy.

The second graph shows the year over year percentage change in auto loans. The implications there are fairly self-explanatory. Auto sales are slowing down because the “universe” of potential prime and subprime rated car buyers, new and used cars, has been largely exhausted. In fact, with the default rate on subprime auto loans beginning to hit double-digits, the next phase in the automobile credit market will likely be credit implosion crisis.


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    Total 4 comments
    • The Troubles

      Retail sales are in the crapper. Wholesale inventories sit on the shelf and gather dust. Manufacturing slows to a crawl.
      No disposable income left over after basic necessities are met. We are seeing things now on sale that have never been on sale before. Take a look at the new car ads on Telur-Vision, they can not give them away at 0 percent interest, no payments for 6 months, all for a depreciating asset. What a mess. This may be a part of the Amazon craze, however my bet is that it is because of the so called Affordable Health Care Act. Nothing affordable about it, all Fake money, Fake Medicine, Fake Insurance, Fake Goobermint, Fake debt, Fake Accounting, all centered around “consumables”. Wait, it gets even better. They see you coming as they get ready for the deposit,

      Do you ever ask yourself when you go to the Doctor, why it is that the front desk person who takes your copay, has no idea just “How Much Money” the good Doctor charges for a certain procedure. Think about that for just a moment. They make up the prices as they go. What a rip off. We walk into DR Appointments by handing the Doctor a “Blank Check” right out of our own personal checking/debit account. You are giving them a Deposit. Fleecing. That is what Medical Billing is in Fact. It is Fleecing of the Sheeple.

    • desertspeaks

      BANKS DO NOT LOAN MONEY! THEY NEVER HAVE AND NEVER WILL! Don’t believe it?? obviously not!!
      Go to your favorite search engine and search for “THE CREDIT RIVER CASE” A bank president, under oath, in court, admits that banks create “without any constitutional authority to do so, but with the tacit permission of their BITCHES IN CONGRESS, they just click a few keys on a keyboard and POOF!” magically money appears out of no where!”


    • Everette

      No , Stupid ! It’s the banking elite that kiss the NWO Vatican natzi Esau Edomite bunches asses that are now trying to to dump the market . They want marks in the computer instead of pieces of paper with pictures of dead presidents . Had Americans in the early 1900 when the jackasses started rounding up the gold and silver and melting them into bars for later transportation , done what their Constitution told them to do , we would not be in the mess we are now ! The shadow government started in 1871 and operated by the Vatican should have also been removed and hung on the streets in front of the capital building for all to see . The Constitution told us plainly we were not to change the coining of the gold and silver coins . Why ? Because it stood for its self . What we have today is trash with no gold to back it up like we were told it would . Why is there no gold , because the elite bankers stole it . Now they want a mark system in computers so they can at any time remove your wealth with a push of a button . This is why the problems are mounting . This was foretold before Trump took office . The reason Kennedy and Lincoln were shoot I read was because they were going to pay off America debt . When these scum bags make a loan and create money , lets say $100.00 you are charged interest . But only $100.00 is created . And let’s say the interest is $10.00 . In their world you will never really pay that off , just like our debt in America . Why because the interest does not exist and was not printed off when the $100.00 was created . So eventually all the interest continues to mount up until we reach what America owes today . 20,000,000,000,000 does not exist in the world so I read . So we must sell off scrap , goods , cut up war ships and whatever else we can round up like O nut case did ! This was why the scrap industry for awhile was booming . So was the thieves working at night to steal what you had worked hard to gather and claim as yours . I was victim of such crimes . And all this we can blame the banking elites . They stock piled precious metal and goods stolen by the thugs that didn’t want to work , but was enjoying the handouts scum butt was giving out . Not to mention the free medical for drugs . This lead to addiction . Then that lead to stealing from those who had in order to keep up with their addiction . Thus we have the stupidness we are now in today caused by the Muslim idiot Obama ! Hang his ass for crimes against humanity and Treason against the USA ! Oh by the way he also brought in Russian troops , UN troops , Isis troops and drug cartels to help bring down America . Wait till that starts up . They are already living near and around you now ! Hope you got guns . Oh that’s right O nut case want his liberals not to have them . I guess you will have to find a republican that believes in guns to protect you when they begun their stupidness ! The fires out west and now in middle America , they say they started them . Why ? To destroy your food supplies and create open areas making it hard to hide . Almost 1,000,000 aces and 1,000,000 cattle were killed in the fires in middle America this past month . Not to mention whatever crop being grown , or was being stored . If you look at the whole picture instead of the one piece of the puzzle , anyone can see America is being attacked from within . We need to go back to coining coins of precious metals that stand for themselves . Then we would not have this trouble with control by evil beings that want to enslave everyone .

    • seataka

      Nice page, thanks for posting

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