The Fed released the H.8 Assets and Liabilities of Commercial Banks, Friday afternoon. Commercial and industrial loans continue to crash. They are down 2.4% month-over-month.
You can see the spike at the beginning of the shutdowns. Many businesses drew on their lines of credit and participated in the PPP loan program. Since that time, lines are getting paid down, and new loans are not getting originated.
When you look at all loans that banks are creating and subtract the commercial and industrial portion, consumers are borrowing at a rate that is increasing at 2.3% month over month.
These loans would be mortgages, car loans, student loans, home equity and personal lines of credit.
Rothbard stated that business borrowing would expand the money supply. I’m not sure he ever thought the Fed would do what it has done to date to juice the money supply. It remains to be seen if businesses will come back to the table to borrow. I think that many are unsure of the future. When the future is difficult to predict, businesses don’t want to take a chance on borrowing money for expansions. In time, the full picture will develop. In the meantime, it will be important to keep an eye on the yield curve and the money supply.
Using Bank of America’s favorite stimulus money tracker, deposits at commercial banks are still well above the trend line.
Consumers are holding approximately $2.5 trillion above the pre-shutdown trend. Now, these “excess” holdings have come down 0.3% on a week-over-week basis. Bank of America stated that these consumers would be ready to spend when a “sunny day” arrived.
Consumers holding this much money also have high expectations of future inflation.
I don’t think we should be giving too much weight to this. It is interesting to see the up-tick in expectations. The rate increased to 4.8% in June. It’s a new high for the series and the eighth straight month of increase. I’m sure its just transitory guys. Nothing to see here. Just people who seeing rising prices in the grocery store, at the gas pump, and rent.
Important and Potential Market Moving Events
This Week
5.30am CPI (June)
Wednesday, July 14
5.30am PPI (June)
9am Fed Chair Powell Testimony to Congress
Thursday, July 15
5.30am Initial Jobless Claims
5.30am Import/Export Prices (June)
6.15am Industrial & Manufacturing Production (June)
Friday, July 16
5.30am Retail Sales (June)
7am U of Michigan Consumer Sentiment (Prelim for July)
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