Sunday, October 6, 2013

US loan-to-deposit ratio the lowest in 30 years and falling

The chart below shows US total loan balances relative to bank deposits over the past couple of years. The total loan growth rate continues to deteriorate while deposits grow.

Source: FRED (5/4/2011=100)

In fact the ratio of these two measures, the so-called loan-to-deposit ratio is now at the lowest level in some 30 years.

Note that the jump in early 2010 is not real - it's an accounting adjustment

This creates material headwinds for economic growth. Unfortunately there is no evidence that the current monetary policy will reverse the trend of weakening loan growth. And as we all know, the US fiscal policy (if one could call it that) is not going to help much either...
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