Minggu, 12 Agustus 2012

No shortage of money (cont.)

Bank loans to small and intermediate-sized businesses continue to grow at strong, double-digit rates: 13-15%.

It's not the amount of loans generated, it's the fact that they are increasing relatively rapidly that's important, since that means that a) banks are more willing to lend on the margin, and/or b) businesses are more willing to borrow, and both imply an increased confidence in the future. Either way, new bank lending is expanding the supply of money, which is growing faster than its long-term 6% annual rate.

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