Board-Ansicht
Mix-Ansicht- Die Qualität der Kredit-Vergabungen in den USA: CCC - Minus - Emerald, 03.06.2004, 06:08
- hervorragend bis auf die Unterscheidung von good and bad debt - EM-financial, 03.06.2004, 10:45
Die Qualität der Kredit-Vergabungen in den USA: CCC - Minus
-->Raising Rates, But How Did the"Cutting" Campaign Go?
6/2/2004 6:20:58 PM EWT
The major stock indexes ended mixed on Wednesday (June 2).
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In chapter 13 of Conquer the Crash, Bob Prechter observes a largely overlooked truth about the Federal Reserve, namely that controlling the money supply is only part of the central bank's job. In terms of volume, the Fed's bigger task is to expand credit.
And for 90 years, the Fed has indeed expanded credit to staggering levels, but that's a story for another day. With the central bank supposedly about to begin raising rates, let's look at how it"succeeded" in the rate cutting campaign that began in 2001.
If you look at individual households -- revolving home equity loans, for example -- the debt has grown rapidly, from $128.3 billion in January 2001, to an all-time record $326.4 billion as of May 19, 2004. Of course, home equity loans turn assets into debts; this debt will produce no income, only the burden of repayments.
If, on the other hand, you look at commercial and industrial loans, the lending has been progressively shrinking. It reached a record $1.1 trillion in January 2001, and from there has steadily fallen to a near six-year low of $871 billion (5/12/2004). Commercial and industrial loans also must be repaid, yet the debt often produces growth and income (via new equipment, facilities, etc.).
So: During the most aggressive interest rate-cutting campaign in its history, the Federal Reserve has helped millions of households convert their assets into burdensome liabilities. Yet the Fed did not help increase overall borrowing by businesses (despite the lowest lending rates since the 1950s), which could use the loans to create growth.
The facts show that the Fed's attempt to expand credit has increased"bad" debt, even as"good" debt shrinks. This (among other things) is what the media somehow overlooked in the recent frenzy of"Fed rate hike" stories.
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