Credit Growth Slows, Vulnerabilities Increase

In the 21st Century, when there is no longer any difference between money and credit, Credit Growth drives Economic Growth. In the new Macro Watch video, we look at who has been lending the money to fund the credit growth and where their money comes from. We then look ahead to see who will have to lend the money in the future.

What we discover is a growing risk of a new systemic banking sector crisis and an economy increasingly dependent on credit creation – rather than savings – to fund itself. These findings highlight just how vulnerable the economy and the financial markets are if the Fed now begins to increase interest rates.

You will also be interested to know that credit growth slowed again during the first quarter, which helps explain why the economy contracted by 0.2%.

If you are a Macro Watch member, log in now and watch “Who Will Lend The Money To Drive Economic Growth?”

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One comment

  1. As always Richard very interesting.

    One place that might be able to absorb more credit is the banks. They have about $2.5 Trillion parked at the Fed earning only 0.25%. They can certainly absorb new Treasury issuance for years. Note that since QE ended, excess reserves have fallen. From 2.75 Trillion in Jan 2015 to $2.46 Trillion now.

    But beyond buying Treasuries and US Agencies, they may not be able to find credit worthy borrowers.

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    2015-07-01 2457.406

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