There is no credit crisis

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Wed, Dec 17, 2008 - 8:49am
#1
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There is no credit crisis

A friend of mine sent me this link yesterday to an article that published by Celent - they are a financial industry consulting organization owned by Oliver Wyman.  The article cites statistics to shore up their arguement that there is not credit crisis.  I also found a short critique of the report underlying the article that states that the lending is a result of borrowers tapping their existing credit lines.  I'm not sure what to make of this.  Any thoughts?

 http://www.celent.com/PressReleases/20081210/WhatCreditCrisis.asp

Wed, Dec 17, 2008 - 10:04am
#2
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Re: There is no credit crisis
From the article... "Far from seeing a tightening of credit, a number of measures show that credit has expanded, and Celent finds that the lending markets are in surprisingly good health. Data published (in most cases by the Federal Reserve itself) show that:..."
Data published in most cases by the Fed, that would be our first red flag.... After learning the information in Chapter 16 of the Crash Course, Fuzzy Numbers.  I for one am not trusting the data provided by the Fed or our government.  Since we don't have access to the full article and from reading the little information that we can, appears to me that Celent is missing many pieces of the puzzle. 
Cat
Wed, Dec 17, 2008 - 11:35am
(Reply to #2) #3
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Re: There is no credit crisis

I've been wondering if conditions are more that people/businesses don't want to borrow money despite it being forced at them rather than the supposed lack of money available to be borrowed.  I could go right out out today and get a car loan, max my HELOC, or run up thousands on my credit card if I chose to. 

Tue, Dec 23, 2008 - 12:14am
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Re: There is no credit crisis

If lending institutions foresee hyperinflation, they will not want to lend now only to be paid back in near worthless currency later. 

Tue, Dec 23, 2008 - 1:42am
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Re: There is no credit crisis

Of course there is no credit crisis.  This is a DEBT CRISIS!

Mike 

Sun, Jan 11, 2009 - 12:39am
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Re: There is no credit crisis

That's correct. It's a debt crisis...unpayable interest-bearing debt. There can be no end to the amount of money that can be created when all money is created as book entries on ledgers of a lender. They simply make a debit to a loan account and equal credit to a demand account and hand the borrower a receipt. When the borrower writes checks against the new numbers he puts new money into circulation that never existed before. When the principal is repaid it is uncreated. However, there will always be a constant and growing shortage of money to pay the total debt with because when all new money is created as loans there is no way to create the interest which must also be paid. The interest can only be paid in bankruptcy.   

Sun, Jan 11, 2009 - 3:18am
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Re: There is no credit crisis

On 9 October 2008 the Federal Reserve Bank began paying interest to Banks for their statutory reserve deposits, clearing balances and excess balances.

In effect, these loans were as good as Treasuries in the sense they are "zero risk" for default.

Hence, Banks had an incentive to loan money to the Fed that they didn't have before 9 October.

If the authors of this report have taken this factor into account in their analysis of the apparent increase in commercial bank lending, then they probably got it right.

If they didn't take that factor into account, then they don't know what they are talking about, IMO.

http://www.federalreserve.gov/newsevents/press/monetary/20081006a.htm

With the ZIRP announced in December, the advantage to banks of loaning money to the Fed has virtually disappeared.

http://www.federalreserve.gov/newsevents/press/monetary/20081216d.htm

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