U.S. economy still starved for credit

June 21, 2010

So says Paul Kasriel of Northern Trust: “I consider this financial sector net credit contraction the major headwind for the economy, preventing a more normal robust cyclical recovery.”

And here are some eye-opening charts:

kasriel1

This one, too:

kasriel2

One comment

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The Fed is filled with bankers, and bankers love austerity in the forms of scarce capital and high interest rates. Clearly, the Fed resents having to lend money at low interest rates, as do banks in general. The most important objectives of the Fed (low inflation and high economic growth) are all well-served by maintaing economic austerity, regardless of how those austerities derail people’s lives. As long as people are not starving, and until interest rates go up sharply, there is no reason or incentive for the Fed to lend money to anyone. Again, the Fed is manned by bankers who love austerity in the forms of scarce capital and high interest rates, and until the Fed gets its way, the Fed mantra will continue to be, “let them eat cake…”

Posted by mckibbinusa | Report as abusive