More evidence of a credit crunch–bank lending drops

More evidence of a credit crunch–bank lending drops

Lending by U.S. banks contracted by the most on record in the last two weeks of March, according to the Federal Reserve’s latest H.8 report. Commercial bank lending dropped nearly $105 billion in the two weeks that ended March 29, the most in Federal Reserve data back to 1973. A more than $45 billion decrease in the latest week was primarily due to a drop in loans by small banks. But big banks weren’t immune. The Fed’s report showed that lending decreased $23.5 billion at the 25 largest domestically chartered banks in the latest two weeks, and plunged $73.6 billion at smaller commercial banks over the same period.

Please Watch My New YouTube Video: Trend of the Week Is a Minsky Moment Ahead?

Please Watch My New YouTube Video: Trend of the Week Is a Minsky Moment Ahead?

This week’s Trend of the Week is Minsky Moment Ahead? Hyman Minsky was an economist who studied credit cycles. Minsky died in 1995, but in 1998, during the Russian Ruble and Asian Currency Crises, economist Paul McCulley recognized the situation was one described by Hyman Minsky, and dubbed it a “Minsky Moment.” A credit cycle starts when credit is abundant and banks are lending generously and gradually taking bigger and bigger risks. Eventually, an event like the Silicon Valley Bank failure hammers the banks, causing them to pull back and tighten their lending to a greater degree than at the start of the cycle. It’s a classic case of locking the barn door after the horses have escaped. Once the crisis is in place banks tighten their lending standards and this causes a constriction of credit when the economy really needs credit–a Minsky Moment. Right now, there are a lot of contractionary forces at work in the economy, including the Fed’s raising of interest rates while selling off some of its balance sheet. The two areas that will likely be hit hardest by these contractions and the Minsky cycle are emerging markets, which are having trouble repaying debt from lenders such as China that are not willing to renegotiate, and the start-up market, where private companies are finding it harder to raise enough capital to keep their companies going. If you’re holding emerging markets stocks or new tech stocks with an eye to the future, make sure you’re comfortable with where they are presently, and watch that they’ve been able to secure the funding they need. Be careful out there.

The global debt bubble continues to inflate

The global debt bubble continues to inflate

Okay, we all know that the current rally that has pushed U.S. equities to one record after another is built on cheap money. That is on a Federal Reserve that has promised to cut interest rates one, two, or maybe even three times in 2019. And on a hope on Wall Street...
Special Report: The Crisis in Global Capitalism and 5 Ways to Position Your Portfolio–Part 1 The Crisis in Global Demand

Is a slow-motion credit crunch already here?

Thanks, folks. For weeks now I've been writing about an impending credit crunch that would produce a reset (a polite term for a big whoosh down the toilet) in global asset prices. The problem, I've noted, is that while a credit crunch seems likely, putting a time to...
More signs of the coming credit crunch

More signs of the coming credit crunch

Looking for signs that lenders are taking on more risk and driving the credit markets to shakeout and a Minsky Moment, when suddenly credit gets not just expensive but really scarce? Here's one. Now the regulators have loosened up on Wall Street, the country's biggest...
Special Report on Investing in a Late Cycle Market Part 2: Sell offs in Late Cycle Markets are contagious, very contagious

Special Report on Investing in a Late Cycle Market Part 2: Sell offs in Late Cycle Markets are contagious, very contagious

The big reason to distinguish the business cycle from the credit cycle–as I did in Part 1 of this Special Report “Investing in a Late Cycle Market: Late Cycle Markets are crazy–Part 1, The problem”–is that the disruption caused by late credit cycle markets is way more contagious globally than the disruption created by late business cycle markets.