Anyway, the level of lending in a more sensible environment should be much higher than the current level, since the problem at the moment is that the banks don't have any money to lend.
I'm not even sure that the money that was sploshing around the system prevously was available for companies who wanted to do real work. Pure financial stuff was much sexier.
Well, it did slosh around the housing market in the US. A few new home builders went from local to regional to national and if they didn't become massive centers of the economy (like finance was), certainly became the bellweather of US economic "health". It was one of the reasons I ran away from the equities market - for quarter after quarter, only housing was doing well.
But your point is well taken that the economic picture we see today is probably more accurate, except for those trying to meet contractual obligations made under seemingly more propitious conditions. I wonder to what extent that has worked its way through as well. I've heard both good projections and bad.
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banks don't have any money to lend
After all the billions of TARP dollars thrown at banks just so they would lend? I have trouble wrapping my mind around that. I know there was criticism over banks using TARP funds for M&A - definitely not what it was meant for - and all that money, years of debt burden...for nothing? "It Can't Be Just About Us"--Frank Schnittger, ETian Extraordinaire
:: banks don't have any money to lend After all the billions of TARP dollars thrown at banks just so they would lend? I have trouble wrapping my mind around that. I know there was criticism over banks using TARP funds for M&A - definitely not what it was meant for - and all that money, years of debt burden...for nothing?
After all the billions of TARP dollars thrown at banks just so they would lend? I have trouble wrapping my mind around that. I know there was criticism over banks using TARP funds for M&A - definitely not what it was meant for - and all that money, years of debt burden...for nothing?
Once again there is a misapprehension as to the nature of banking. Banks do not take in existing money and lend it. If they did, there could not be any new money.
Credit Institutions aka Banks simultaneously create new money as interest-bearing credit and matching deposits.
Sure, Banks are made liquid through TARP and may have better quality assets (bailing out the rich), but they are conserving capital jealously against further defaults, and they have a shortage of creditworthy people and projects to whom to lend.
The TARP money is a credit transfusion replacing the credit haemorrhaging out of the economy as it collapses. The only ways of getting it into the economy is to spend it or lend it. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
banks don't have any money to lend After all the billions of TARP dollars thrown at banks just so they would lend?
After all the billions of TARP dollars thrown at banks just so they would lend?
Or you have the banking regulators intervene the institutions and put them back on their feet so they can start lending again, at a lower cost than TARP. The brainless should not be in banking. — Willem Buitler
The problem is that the shadow banking system, which had taken such a big role in financing the economy (via securitisation, and commercial paper, asset backed or otherwise, mainly), is now gone, and banks cannot step up to replace it.
So banks actually lend a little bit more than before, but companies get much less financing than before, because of the disappearance of the unregulated lenders, and the inability of the banks to step in on the scale required. In the long run, we're all dead. John Maynard Keynes
