Part 4: Central Bank Policy Influences Demand for Household Credit
Continuing from Part 3... Again DDLA insists: "It is about the ratio of supply to demand. (credit)"
The Nattering one muses: And not only did Mr. Trutta point out the obvious ("Indeed it is. It's called the deregulation of interest rates."), he offered cogent insight into some behind the scenes internals as well, unsolicited I might add:
Secular Stagnation:"If savings do not exchange hands (are a leakage), they exert a dampening, contractionary, or net deflationary impact on prices,production, employment, and incomes. The economic engine is broke."
This new increase in the supply of loan-funds lowered rates even further: "as the NBs (MSBs, CUs, S&Ls), came into the money creating "game" in the early 90's (as they became new CBs), and an unlimited volume of new commercial bank credit was unleashed (just as reserve requirements became "unbound")."
"The second biggest factor suppressing rates was that we became a net debtor nation in 1985 as our trade deficits began to swell."
"Financial engineering (new money substitutes), suppressed rates further."
"Have you read about the "Twin deficits hypothesis"?"
The graphs from Part 1 are a freakin horror show. To make matters worse, rates are STILL in ZIRP and we have the heinous side effects (a zombie economy, multiple asset bubbles) from four doses of reanimation QE.
Again DDLA insists: "If both available credit and demand for credit were declining, interest rates would not decline. It is about the ratio of supply to demand."
We Nattered: Yes this is a factor with nuances, despite increasing volumes, as there are varied dampening effects and other influencing factors (as mentioned throughout these comments).
Along those lines, Central Banks are "supposed" to attempt the following:
anchor inflation expectations
influence market levels for interest rates
Which can influence the following:
levels of investment, speculation (appetite, demand)
capital formation (provisioning, creation)
the availability of credit (cost, access, distribution potential)
and overall economic conditions.
Whether the central banks: advertised rate levels or targets are factual or not; utilize practical realistic methods and policies; are effective, justified, successful or not; is all debatable.
We are all, in our own unique ways, nibbling at more or less the same trough-o-conundrums. Unfortunately, sometimes it is the seeming inflexible learned misconceptions (i.e. theory vs reality; cause or effect), but more often than not, it is the silly-ness of semantics that can separate us and keep us from seeing the forest for the trees.
Keep fighting the good fight.
The Nattering one muses: And not only did Mr. Trutta point out the obvious ("Indeed it is. It's called the deregulation of interest rates."), he offered cogent insight into some behind the scenes internals as well, unsolicited I might add:
Secular Stagnation:"If savings do not exchange hands (are a leakage), they exert a dampening, contractionary, or net deflationary impact on prices,production, employment, and incomes. The economic engine is broke."
This new increase in the supply of loan-funds lowered rates even further: "as the NBs (MSBs, CUs, S&Ls), came into the money creating "game" in the early 90's (as they became new CBs), and an unlimited volume of new commercial bank credit was unleashed (just as reserve requirements became "unbound")."
"The second biggest factor suppressing rates was that we became a net debtor nation in 1985 as our trade deficits began to swell."
"Financial engineering (new money substitutes), suppressed rates further."
"Have you read about the "Twin deficits hypothesis"?"
The graphs from Part 1 are a freakin horror show. To make matters worse, rates are STILL in ZIRP and we have the heinous side effects (a zombie economy, multiple asset bubbles) from four doses of reanimation QE.
Again DDLA insists: "If both available credit and demand for credit were declining, interest rates would not decline. It is about the ratio of supply to demand."
We Nattered: Yes this is a factor with nuances, despite increasing volumes, as there are varied dampening effects and other influencing factors (as mentioned throughout these comments).
Along those lines, Central Banks are "supposed" to attempt the following:
anchor inflation expectations
influence market levels for interest rates
Which can influence the following:
levels of investment, speculation (appetite, demand)
capital formation (provisioning, creation)
the availability of credit (cost, access, distribution potential)
and overall economic conditions.
Whether the central banks: advertised rate levels or targets are factual or not; utilize practical realistic methods and policies; are effective, justified, successful or not; is all debatable.
We are all, in our own unique ways, nibbling at more or less the same trough-o-conundrums. Unfortunately, sometimes it is the seeming inflexible learned misconceptions (i.e. theory vs reality; cause or effect), but more often than not, it is the silly-ness of semantics that can separate us and keep us from seeing the forest for the trees.
Keep fighting the good fight.
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