Wednesday, September 23, 2009

Lending - Is This Bullish?

Thinking about the implications of this chart is giving me a headache. It was part of a chart book that someone sent me this morning. I'm not sure who the outfit Economic Data is but h/t to them.

It would be easy to jump on the negatives that the economy can't grow without credit, the government can't sustain these leverage levels, the dollar is going to continue to be weak...

Consider the positives:

  • Commercial bank and shadow banking leverage was way too high. That is being corrected.
  • Commercial bank lending will improve at some point
  • Said lending will lead to economic growth. It always does.

The downdraft in commercial lending as depicted and extrapolated through year end has been a long three years. Going in the opposite direction for the next three would be a nice tailwind.

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