Loan demand drys up as Fed “liquidity” sits dormant

More Sturm und Drang from the US Fed today as they promise yet another “stimulus” rabbit out of an increasingly threadbare hat. The truth is that indefinite liquidity efforts are not helping the US economy because cash is already piled to the rafters in the financial system but not moving into the real economy. Consumers who have a choice do not want to take on more debt today, and those who are desperate for it, do not qualify as a worthwhile credit risk. Global demand has flat-lined. Tough gig being a banker “magician” these days, the crowds used to be so impressed with more leverage, now they just yawn and hurl insults.

Money velocity has rolled off the charts and under the chesterfield.








As shown in this clip, cash deposits are up 21% in US banks today while loan demand has grown by just 4%. Here is a direct link.

P.s. For those that missed it, the Fed today lowered its GDP growth forecasts (again) for the US to 1.7 to 1.8% for 2012, and 2.3 to 3% for 2013.  This would be the 54th time they have lowered their overly optimistic growth forecasts over the past 5 years.  It seems very likely they will be doing that again in the New Year.  Poor Ben will be mystified as to why this just keeps happening…

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2 Responses to Loan demand drys up as Fed “liquidity” sits dormant

  1. michael says:

    He can’t move the needle anymore… bugs sweating, may have to take some of Al’s advice sooner rather than later….

  2. rolling stall says:

    Purchased a print edition of MarketSmith stock charts, first in a long, long time.

    Scanned through the chartbook last night. Very dismal. Flatline is the buzzword!

    Only homebuilders, and stuff connected with homebuilders doing relatively well, BUT that is because of four long years of ZIRP finally hookwinking the unsuspected, luring them into the final trap of their life. Extremely low (desperate) rates, maybe even an ARM…..beware the USD. If it begins its long-term downtrend, its double-digit reset time and certain death for the newest homebuyers. And, those utility bills, and the real estate taxes with the ‘benefits and pensions’ of the local unions/workers….UGH.

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