Chart Of The Day: This Is What Debt Saturation Looks Like

[Cebu_4_2]

Chart Of The Day: This Is What Debt Saturation Looks Like
Worst. Loan Creation. Ever For all the endless talk of a recovery during the past five years, there is a very tangible reason why for most people this is nothing but spin, propaganda and lies: when one strips away the retroactively adjusted GDP, the seasonally adjusted (and politically mandated) counting of temp jobs, the constantly upward revised jobless claims, the Fed’s $4+ trillion balance sheet of course, and even the declining (yes, declining (http://research.stlouisfed.org/fred2/graph/?id=A229RX0)) real disposable income per capita, what one is left with is the lowest loan creation out of a recession (or depression) in history, and is at indexed levels last seen during the Lehman collapse over five years ago!
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/12/Loan%20Creation%201_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/12/Loan%20Creation%201.jpg)

Why is loan creation important? Because in traditional economics (not their “New Normal” equivalent, where central planning decides everything), loans – i.e., money created by commercial banks – ultimately leads to GDP growth. It also has a direct bearing on the steepness of the bond curve and thus, inflation expectations. Conversely, lack of loan creation ultimately means the government is forced to adjusted the definition of GDP to make it seem as if there is growth, or to rely on an inventory stockpiling boost to “growth” and all other recently seen gimmicks to force the conviction of “growth.”
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/12/Loan%20Creation%202_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/12/Loan%20Creation%202.jpg)
There’s more. As the charts below show, there is a direct link between loan demand (and thus creation), and EPS growth, Industrial Production, Employment and CRE development. Obviously, the lower the loan creation, the worse all of these will look.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/12/Loan%20Creation%203_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/12/Loan%20Creation%203.jpg)

But how is it possible that banks continue to function in an environment in which there has been zero loan creation for the past 5 years? Simple: the banks’ excess deposits (a liability) has been pumped higher by about $2.5 trillion thanks to the Fed’s excess deposits:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/Total%20Loans%20Deposits%20And%20Reserves_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/Total%20Loans%20Deposits%20And%20Reserves.jpg)

… and instead of lending out reserves, which banks don’t do (for those still confused about this, read the following primer from S&P (http://t.co/yLDeYkjxUJ)), banks instead use them as initial and maintenance margin for risk-chasing trades as JPM so kindly explained over a year ago.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/JPM%20Balance%20Sheet_1_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/JPM%20Balance%20Sheet_1.jpg)
… which is also why once excess deposit creation, i.e. “flow”, slows down, halts or is put in reverse, watch out below.
Furthermore, as long as the Fed creates reserves, and excess deposits, banks have no incentive to force loan creation.
In other words, as long as QE continues, and the Fed injects however many tens of billions into the commercial bank balance sheets each month, all talk of an economic recovery will be bullshit, simply because all of the Fed’s money makes it only into capital markets, resulting in asset inflation, but not into the economy, where it is up to commercial banks to create loans, and the resultant money that then leads to an increase in money velocity and ultimately, if allocated carefully, growth.
In the meantime, there will be no economic growth, period, as long as the loan creation in the top chart shown above refuses to move higher, and any talks of an economic recovery will be merely lies, propaganda and yes – more lies.
Charts: Barclays, JPM, Zero Hedge

[mick silver]

if loans are down and the banks are taking in more money from the fed , what are they doing with the money could it be going to the stock market with the highs we keep seeing

[Ares]

if loans are down and the banks are taking in more money from the fed , what are they doing with the money could it be going to the stock market with the highs we keep seeing

It's most likely being used in the stock market. It's easy to leverage your position when you get "free" money to do it with.

[mamboni]

I wager 10,000 quatloos!!!

[Hypertiger]

Because credit is debt owed to someone else and ultimately back to the bank which created and owns it used as money.

In 1981 at the maximum potential of the hyperinflation where bonds were being sold like mad...the pole shift happened at the inflection point and since then bonds have been bought like mad leading into a controlled hyperdeflation until now

The more credit created and invested into yield extraction from the slaves in bondage...the less yield that can be extracted from the slaves in bondage since the slaves in bondage within the master system are the supply of yield and the demand for yield.

So you have a situation where the slaves are trying to escape bondage by investing into bondage of yield producers to escape the production of yield while at the same time living off the consumption of yield from the yield producers.

It's just caused yield rates the past 32 years to implode down into a liquidity trap.

The Federal reserve does not set yield rates...the population dictates yield rates...and for the past 32 years people have been trying to do less and less work or production of yield but have been demanding more and more compensation or consumption of yield

And the point has been reached where the demands by all in the system from the system for yield are greater than all in the system are supplying to the system...eventually the liquidity trap point will be hit where it will be impossible to extract a positive yield and the system will implode.

The slaves at the bottom are already supplied with the minimum compensation so cutting there will not work while the masters at the top who receive the maximum compensation distribute what all below them supply to them minus the retail mark up or cut of yield the master live off of...So the only place to make up the difference in lack of yield from the bottom is in the middle or servant class.

They are being cut off and it is causing the servant class to shrink and the slave class to expand...but all are yield starved.

You have the rich masters who have pricing power

The wannbe rich servants or whippers

and the poor slaves.

the resources to power the magic printing press of inflation have run out and the USA along with the world has been deflating into a bust since 2008 where the Bretton woods boom (inflation) from 1944 reached maximum potential and began to visibly end

debt is money and money is debt.

the only way to support the creation of more and more debt is to supply more and more resources.

The resources of the USA after centuries have finally been exhausted...

it's over...But since you all are ignorant of real economics or anything real and worship a fantasy...You all have zero clue that it is game over...

there is no way to vote your way out of what you have spent 7 decades voting yourselves into.

You can kiss delusions of a return to the US Constitution goodbye...That is not going to happen...There will not be enough left of the USA along with the world to fill an ashtray once this runs it's course.

In the end it will be the total annihilation of all opposition to the total annihilation of all opposition policy.

[Spectrism]

Why is loan creation important? Because in traditional economics (not their “New Normal” equivalent, where central planning decides everything), loans – i.e., money created by commercial banks – ultimately leads to GDP growth. It also has a direct bearing on the steepness of the bond curve and thus, inflation expectations. Conversely, lack of loan creation ultimately means the government is forced to adjusted the definition of GDP to make it seem as if there is growth, or to rely on an inventory stockpiling boost to “growth” and all other recently seen gimmicks to force the conviction of “growth.”


Who wrote this? Loans are an INDICATION of GDP growth. You don't get GDP growth FROM loans. Loans are the hunger demand for money in a growing economy. Loans do not put the hunger into the economy. This is why things are so screwed up. They are force-feeding a dead animal.

Then- the excuse that government is "forced" to do some adjusting... LOL... doubletalk.

If you add in money borrowed by the government, that curve would look much different.

[woodman]

If you add in money borrowed by the government, that curve would look much different.

So true. The borrower of last resort. This is a compelling reason for socialism as far as the government is concerned. Force the people to take money by eliminating a free econemy and drive everyone into a firmer bondage.

[Cebu_4_2]

Who wrote this? Loans are an INDICATION of GDP growth. You don't get GDP growth FROM loans. Loans are the hunger demand for money in a growing economy. Loans do not put the hunger into the economy. This is why things are so screwed up. They are force-feeding a dead animal.

Then- the excuse that government is "forced" to do some adjusting... LOL... doubletalk.

If you add in money borrowed by the government, that curve would look much different.

Think back to the collapse of housing and the stock markets. Since that time it has been very hard to get a loan for anything.

I know a doctor who couldn't get a loan to fix up and turn one of his houses. He had done this previously instead of using his own capital, this time no deal even though he clearly had enough capital plus funds in deposit at the very bank he tried to get another loan.

Then you have businesses that need to upgrade equipment, no deals. Banks simply wont lend except in rare instances. I own a corporation that has the same equipment that I bought in 2006! Loans paid off and perfect credit.

Homeowners? Well I have very personal experiences with a simple loan remodification. They dragged this fucker on, losing papers, lies, in review and they eventually sold my home to themselves during the review. So I hired a lawyer and we had them on 16 counts of fraud, judge made it impossible to fight.

With all of the above said is there any wonder why any of them are unable to prosper?

The economy was dependent on loans to grow, that's just the way it was designed. Then they simply changed the rules and paid the banksters insurance, free money to not loan. That is where we are today. Now all those businesses and homeowners have given up on the loan angle. Myself? Fuck them bastards. I will plug along and piece meal my equipment. My home that I lost a lot of equity in... I just went and paid cash for something less. My neds have changed and the banks are completely useless to me or my business.

Spread this attitude across the US and the globe, yes the bankers are in trouble as soon as the free money stops flowing to them. Fuck them banksters, who needs them.

[Libertarian_Guard]

Who wrote this? Loans are an INDICATION of GDP growth. You don't get GDP growth FROM loans. Loans are the hunger demand for money in a growing economy. Loans do not put the hunger into the economy. This is why things are so screwed up. They are force-feeding a dead animal.

Then- the excuse that government is "forced" to do some adjusting... LOL... doubletalk.

If you add in money borrowed by the government, that curve would look much different.

I don't know who wrote such, but how about this….

In our fiat money banking arrangement, an increase in commercial bank loans will support a higher GDP, and subsequently a decrease in commercial bank loans will lead to a lower GDP. Unless the lender / creator of last resort (FED) steps in and artificially makes up the difference, as it has been, with an expanding balance sheet.

Like the Kitty has been pointing out, a liquidity trap of near zero % interest rates is a deal breaker according to the old rules.