The commercial channel at most banks we hear from is still running at 1/3 to 1/2 of pre-2008 levels in terms of new originations and demand for credit. This is why when clients ask us about whether we worry more about inflation or deflation, our answer is “both.” The chief worry bead remains revenue flowing through banks, housing and the US economy.
In contrast to the direct approach taken to debt restructuring in the 1920s and 1950s, today the response by the Fed and the other industrial nations can best be described as a weak effort at “Global Weimar,” whereby the US central bank expands core money and provides credit to other central banks in the hope that reflation will occur. All this in an effort to support the fiction of asset valuations on a global basis and delay the day of reckoning with respect to debt default. But can any reasonable observer look at Ireland or Spain or even the US and expect these nations to pay their accumulated debts at par?
Read the rest of Whalen’s excellent piece here: Inflation or Deflation? Or is it Global Weimar?
Hat tip JL for sending this piece along!