A chart summarizing all the problems of the US financial system-Deposit exceeds loan

Now, major banks have ended their financial reporting season, with the biggest highlight being the establishment of loan loss reserves from the second quarter330Billion US dollars collapsed to the end of9month30The quarter of the day is only50USD100mn......


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_172916032f7clcjmt.png[/img]


......Some people believe that this is a vote of confidence in the economy, as bank risk managers clearly did not anticipate another significant decline in the economy (if the second wavecovidForcing a new closure, which may change, we can take a closer look at other equally noteworthy observations in the US financial industry.


Firstly, we observed4After a surge in loans in the first quarter, the total loans of major banks have decreased for the second consecutive quarter (note that this is almost entirely driven by revolving withdrawals, which have since been refinanced by bonds and other debt instruments).


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_172924083e0lzv2og.png[/img]


Those who have followed our report on the surge in bank loan standards (which has recently reached levels never seen since the financial crisis) will not be surprised by the continued freeze in loan issuance: after all, banks still fear loans from most vertical industries, including businesses, consumers (credit card and car loans), as well as residential and commercial real estate.


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_17293831668ai2ief.png[/img]


However, despite the continued moderation of US bank loans--There has been no movement in the past two years, and there has been almost no increase since the financial crisis--It can be explained, but it is still quite unsettling: after all, if there is no supply or demand for loans, the economy will not grow at all, that's all. This is also why currency speed will be catastrophic and for the first time in history, close to1Currency of "singularity"。


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_172947831wvl9euyu.png[/img]


However, although in the "large "It is not surprising that loan growth refused to rebound during the most severe economic recession in history, but what is certainly remarkable is when we look at the corresponding bank liabilities: deposits. Here, there is no such problem. In fact, in the past quarter (and several years), deposits have exploded and continued to do so in the previous quarter.


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_172954819jbjibub7.png[/img]


Why is this worth noting? Well, first of all, it shattered what is calledMMTSocialist support "theory"Modern monetary theory, also known as helicopter currency. Looking back, based on a hodgepodge of chaotic concerts thrown on the wall, it is hoped that some comprehensive monetary theory can be proposed. From the perspective of modern monetary theory, private bank loans are not limited by the amount of reserves held by banks at any point in time. In other words, according to modern monetary theory, loans create deposits (see here, here, and here). just... Obviously, this is not the case in reality.


This brings us perhaps the best chart summary of all the problems in the US financial system. This is a very simple chart--It displays the comprehensive deposits and loans within the US financial system, including both US and foreign banks.


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_1730070639koh73mr.png[/img]


Why is it a good summary? Because, firstly,2020In the third quarter of the year, the total amount of loans issued by Bank of America was3.6Trillion dollars: only more than the quarter when Lehman bombed3000USD100mn More than a decade has passed, and the lending institutions of American commercial banks are still in a state of turmoil......


But why don't banks lend more: after all, this is the main way to stimulate the economy that all experts will tell us. It's simple: no need. As shown by the green line above, the total amount of consumer deposits held by banks has continued to explode, rising to a record high6.35Trillion, increased in the first quarter500More than one billion yuan and pushed the deposit loan difference to2.7A new record of trillions! There are so many claims about loans creating deposits.


Of course, as can be clearly seen from the above figure, when the Federal Reserve startsQEAt that time, a breakthrough appeared between the red and green lines, and all of this happened entirely because of the Federal Reserve, which had to useQEStep in and create external currency on your own because banks still refuse to use loans "create "The next chart of excess deposits in the US commercial banking system compared to the Federal Reserve's balance sheet clearly shows all of this in terms of currency.


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_1730189950ojf66ax.png[/img]


This also means that banks have to allocate these excess capital in some way--Reminder, JPMorgan Chase is using "Excess deposits "We provide funding for its prop trading desk and monopolize various derivative markets with the help of London whale traders2013I explained it before.


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_173034048sifda7p6.png[/img]


By the way, the above content also clearly shows the reserve requirements of the Federal Reserve--Most people still mistakenly believe that these reserves are inert for American commercial banks--Once they eventually become excess deposits on banks' balance sheets, how are they used to manipulate the market.


Another consequence is that risky assets continue to be pushed up to record highs with the support of quantitative easing policies, even if the Federal Reserve's "wealth effect "The actual circulation of the economy has been stopped, precisely because of the complete collapse created by new loans--This is the main driver of economic growth "Conduction mechanism"。


In other words, the Federal Reserve maintainsQEThe pedal creates all the benefits of currency for banks (soaring deposits) without any risks (creating loans in a record low net interest rate environment). If you are a major American bank--For example, JPMorgan Chase--You will be very satisfied with this arrangement, not like in the past12Seeking to lend any funds like that. This means that consumers who want loans to fund businesses and other development strategies are just about to have bad luck, because as the latest survey of senior loan officials by the Federal Reserve shows, banks that typically provide them with this type of venture capital have directly closed this program.


[img]https://dstechbucket.oss-accelerate.aliyuncs.com/201019_173045258cbro23w3.png[/img]


And this is precisely the crux of all the flaws in the US financial system, which is why the Federal Reserve'sQEIt will make things worse rather than better, and is gradually destroying the wealth of the middle class, blocking any growth opportunities that the United States may have, injecting all remaining wealth into the hands of those who only benefit from rising asset prices. The result is: the wealthiest in the United States50People are now poorer than the poorest1.65Billions of people are wealthier......


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