Loans, commercial paper – you name it and banks are lending less of it.
And that’s not just in the US. It’s happening all around the world.
Morgan Stanley: It is too early to amend our forecast of an anaemic developed economy recovery just yet. However, given trends in money growth and lending we would expect the monetarists to be warning about the risks of a W-shaped recession. With that in mind, there is a danger that markets and authorities become obsessed about the fiscal implications of the crisis at a time when the real worries should still focus on private sector access to credit and money.
What is there for Monetarists to worry about? We show below charts of the growth rate (year-on-year) of bank lending to the private sector and broad money for the US, Eurozone, Japan, UK and China (Exhibits 1 to 5). What this shows is a rapid implosion of growth rates of lending from normal to negative in the UK, US and the Eurozone, and declining lending growth in Japan (and very high lending growth in China). Broad money growth declined sharply in the UK, Eurozone and Japan (for the US and China broad money growth data is unavailable), and continues to fall in the Euro Area.