Total US Credit & Loans – January 2010

posted by Nima

February 10, 2010 · Posted in General Economics 

total-credit-january-2010

Total credit and loans are, after a brief bump over the past two months, continuing their unstoppable contraction. Since October 2008 they have contracted by $1.3 trillion to now $15.6 trillion.

Deflation is still the name of the game, no matter how much the Fed and the government try to reflate the bubble.

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One Response to “Total US Credit & Loans – January 2010”

  1. [...] The first suggestion, that greater inflation is a better safety net, is primarily concerned with finding more room to avoid the possibility of deflation, which the US economy made a dangerous brush with throughout 2009 and that has plagued post-bust Japan for nearly 20 years. Deflation is an infinitely more dangerous beast than overinflation because the problem is not symmetrical – it does not simply represent a negative interest rate. Deflation changes cash from being a lossy asset into one with real returns, since if tomorrow’s prices are lower, you can hold a dollar and buy more with it tomorrow. This encourages both consumers and investors to hold onto money rather than spend it, dragging down demand and causing prices to fall even further, etc. A moderate level of permanent inflation helps to ward off this possibility even if the money/credit supply contracts as it has. [...]

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