• 30 mins Whitefish Energy Suspends Work In Puerto Rico
  • 2 hours U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 14 hours Thanksgiving Gas Prices At 3-Year High
  • 18 hours Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 20 hours South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 23 hours Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 23 hours Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 1 day Iraq Steps In To Offset Falling Venezuela Oil Production
  • 1 day ConocoPhillips Sets Price Ceiling For New Projects
  • 4 days Shell Oil Trading Head Steps Down After 29 Years
  • 4 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 4 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 4 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 4 days Venezuela Officially In Default
  • 4 days Iran Prepares To Export LNG To Boost Trade Relations
  • 4 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 4 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 5 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 5 days Rosneft Announces Completion Of World’s Longest Well
  • 5 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 5 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 5 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 5 days Santos Admits It Rejected $7.2B Takeover Bid
  • 5 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 6 days Africa’s Richest Woman Fired From Sonangol
  • 6 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 6 days Russian Hackers Target British Energy Industry
  • 6 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 6 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 6 days Lower Oil Prices Benefit European Refiners
  • 6 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 7 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 7 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 7 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 7 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 7 days OPEC To Recruit New Members To Fight Market Imbalance
  • 7 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 7 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 8 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 8 days GE Considers Selling Baker Hughes Assets
Alt Text

Could Low Oil Prices Cause A Global Recession?

The global economy is slipping…

Alt Text

Goldman: Automated Trucks To Cost 300k Jobs Per Year

The race for automated trucking…

Alt Text

Did Venezuela Just Default?

S&P Global Ratings declared Venezuela…

Critical Indicator Signals America's Economic Fortunes May be Changing

Critical Indicator Signals America's Economic Fortunes May be Changing

Something unusual happened the last few weeks.

Bank lending in the U.S. didn't fall significantly.

Since the onset of the financial crisis, outstanding loans at U.S. commercial banks have been in a freefall. Over $600 billion in loans have been repaid or defaulted on. Representing an 8% contraction in credit.

This is unprecedented in the financial data. The Federal Reserve began tracking loans in 1973. Since that time, there has never been a significant drop in outstanding credit.

US Bank Loans & Credit

We are in uncharted waters. Which raises serious questions about the health of the U.S. economy.

How much of America's economic achievement over the last 40 years was fueled by credit? And now that money is flowing out of the economy, back to the banks, what will the effect be on prices, wages and business profits?

As I've been saying for a year and a half, this is one of the most critical indicators to watch in order to gauge America's coming economic fortunes.

And it appears those fortunes may be turning.

For the last three weeks of reported data (February 24 to March 10), outstanding loans stayed flat. The first three-week period without a fall since early 2008.

(The "jump" in loans seen on the chart above in late October and early November 2009 was in fact a statistical anomaly. Caused by commercial banks acquiring loans from bankrupt institutions outside the commercial banking system. Excepting these acquisitions, loans fell during this period too.)

This is an improvement. A stabilizing number would indicate money is no longer being drained from the economy. Of course, loans aren't increasing, which could still represent a problem for an American system built on credit.

The prospects for a renewal in lending are not so sunny. The main problem being the lack of credit-worthy borrowers. Banks are reluctant to lend to people who might not be able to pay the money back after they lose their job, see their home drop in value or go bankrupt under the weight of other debts.

As the chart below from the Bank of Japan shows, non-performing loans are running hot in both America and Europe. Reaching 4% in both regions. This is not an environment that's going to coax out a lot of new lending.

NPL Ratio of Financial Institutions

If you only watch one economic indicator this year, make it this one. Credit growth is key to the American economy. Let's see if it returns.

Here's to changing trends,

By. Dave Forest of Notela Resources




Back to homepage


Leave a comment
  • Anonymous on March 27 2010 said:
    The importance of credit in economic growth and development is a no-brainer, and so once we learn that credit has not collapsed, and may be expanding, we can start smiling again. In fact if you read European instead of U.S. newspapers, it's easy to believe that the new president and his team may have turned the US economy around.
  • Anonymous on March 29 2010 said:
    Mr. Banks, I think you're right on the money. Politics is never on the money in the US. Winning in the polls and hurting whoever is in power is the fame
  • Anonymous on March 29 2010 said:
    Contraction in credit increases economic contraction which is deflationary for assets, and businesses e.g. housing values still falling.
    Inflation is happening also, in the consumables we buy- so we are losing from both sides. The Wall St. driven rally will end badly as main street consumption (70% of GNP) continues to contract, and the gov. tries to replace it with their (our) future tax dollars.This is not sustainable, but the public will reelect them and that's all they care about.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News