Saturday, 15 December 2012

The Making of a New Credit Bubble?: U.S. Bank Credit hits another All-Time High

FRED today released the Bank Credit of All Commercial Banks numbers. As of the week ending 5th December total credit stood at $9.887 trillion beating the previous all-time high set last week. Compared to the same period last year it increased by 5.4%, representing the 41th week in a row with a YoY percentage increase of more than 5.0% on last year. The current value of bank credit is 10.7% higher than that reported at the end of 2007. This smells of the making of yet another credit bubble.

One thing that is different this time (compared to 2007/2008) is that Total Savings at all Depository Institutions is substantially higher relative to bank credit. For example, at the end of 2007 the ratio of savings to bank credit was 44.9%. Today this ratio stands at 66.3%, close to the highest ever reported of 67.1% only four weeks ago (based on data since 1980). This indicates there is plenty of liquidity this time around.