Click to enlarge:


Banks will help the U.S. economy expand without another extraordinary policy move by the Federal Reserve, according to Michael Shaoul, Oscar Gruss & Son Inc.’s chief executive officer. As the CHART OF THE DAY illustrates, banks reduced the amount of reserves held at the Fed’s regional banks and made more money available to businesses in the past 12 months. The shifts took place even though the central bank’s total assets were little changed, as Shaoul wrote two days ago in a report. “This point is sadly missed by those looking for a new round of quantitative easing,” the report said. Between 2008 and last year, the Fed bought $2.3 trillion of debt securities in two rounds of easing to support economic expansion. Bolstering reserves through a third round of purchases “will not increase the supply of or demand for credit,” the New York-based analyst wrote. Reserves for the week ended July 4 were $179.2 billion lower than their peak last July, according to data compiled by the Fed. The decline coincided with a $171.2 billion increase in commercial and industrial loans, based on central-bank data. “This is precisely how monetary policy can affect domestic activity,” wrote Shaoul, who also helps oversee more than $2 billion as Marketfield Asset Management LLC’s chairman. “What it cannot do is magically increase employment.”

Bloomberg News
by David Wilson
July 13, 2012

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “Fed Easing May Do Little to Lift Bank Lending”

  1. [...] Doubts New Fed action “will not increase the supply of, or demand for, credit” – The Big Picture [...]

  2. [...] to determine whether the Federal Reserve will shift policy in light of recent economic data, David Wilson notes that some argue “Banks will help the U.S. economy expand without another extraordinary [...]