Thursday, October 7, 2010

Banks Have Started Lending Again

In the past two months, for the first time since the financial crisis, the total amount of securities and loans on the books of US banks has actually started to expand again.

What's more, in the past three weeks, the total amount of loans and leases made by banks (as opposed to securities) has started to grow, reports Business Insider.

BI has a great series of charts, via Northern Trust economists Asha Bangalore and Paul Kasriel, that explain exactly what is going on, here.

BI is hyping this as good for the economy, but the money the banks are loaning out is not money saved by investors but Fed created money which manipulates the true economy. Thus, it is very negative for the economy, since it is Fed created money entering the system and thus highly inflationary (as opposed to money already in the system that is saved and loaned out).

Keep in mind there's a trillion in excess reserves that can be loaned out, plus the money the Fed is creating as a result of cashflow from the MBS securities it holds and on top of all this it appears that the Fed wants to expand its balance sheet after the mid-term elections! The word for 2011 will be INFLATION.

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