Today I posted my two-hundred-and-seventy-third YouTube Video: Trend of the Week Credit Squeeze
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This week’s Trend of the Week is Credit Squeeze. SLOOS (Senior Loan Officer Opinion Survey), a Fed survey, asks bank lending officers what they’re seeing in the credit market for commercial industrial loans. In the most recent survey, 46% of these officers report that their banks are making it harder to get loans. This is a textbook example of Hyman Minsky’s credit cycle. After a period of booming lending, the credit cycle returns to a period of tightening credit, often coinciding with eye-opening events like the Silicon Valley Bank failure, and a slowing down of the economy overall. The SLOOS report also showed a 56% drop in demand for commercial loans in the first quarter–an indicator that companies are aware that loans are harder to come by. Companies are having real trouble raising capital which is resulting in merger and/or acquisition deals for early-stage companies and employee layoffs as CEOs and CFOs attempt to hoard cash. The signs are that the Fed is taking notice of this contraction in the credit market and is starting to factor it into rate hike decisions. The Fed may decide it doesn’t need as many interest rate increases as it originally thought if the supply of credit is shrinking quickly.
Here’s the link:
