With the Fed set to begin tapering its “credit creation” or rather enabling, through monetization, of public debt, one would think that US commercial banks, after four years of QE, are finally ready to pick up the pieces and open the lending spigots. One would be wrong.
As the latest H.8 statement shows, as of the week ended August 7, the total notional of commercial bank loans and leases in the US was just $7.307 trillion (down $17 billion from the prior week), or less than the systemic total when Lehman filed.
But more disturbing is that as the following chart, which depicts the Y/Y change in new loan creation, shows after peaking at over 5% in June of 2012, new loan creation has consistently declined in a straight line and is now at half the pace seen last summer. Absent a major upside change, new loans will post their first year over year decline next summer just when the consensus expects QE not just to taper but end outright.
To summarize: ETA until UntaperTM becomes part of the vernacular – 6 months.