What do foreign 'experts' like BofE Mark Carney forget to tell you when they say that Ireland's banking system has been [largely] repaired?
Oh a lot. But here are just two most important things:
Both, in level terms and in growth terms, Irish banks remain zombified. 'Repaired' into continuously shrinking credit supply and stagnant household deposits base, the banks have been flatlining ever since the beginning of the crisis. In the last 6 consecutive quarters, household deposits posted negative rates of growth - a run of 'improvement' that is twice longer than the 'recovery period' of Q3 2012 - Q1 2013 when the deposits rose (albeit barely perceptibly). Meanwhile, credit continues to shrink in the system with not a single quarter of positive growth (y/y) since Q4 2009. In four quarters through Q3 2014, credit for house purchases shrunk at just around 3.05% on average - the steepest rate of decline since the start of the crisis.
"Yep, [largely] repaired, Mr. Carney", said undertaker firming up the dirt on top of the grave...
Given the excessive expansion of Irish private bank balance sheets prior to the crunch, a few years of non-expansion is arguably very healthy as long as aggregate demand expands and is directed towards non-lending based activity.
ReplyDeleteThe assets and liabilities of British banks relative to GDP expanded a whapping TEN FOLD since about 1960. Is that an entirely healthy development? It means a big expansion in debts: not 100% healthy in my view.
Given the excessive expansion of Irish private bank balance sheets prior to the crunch, a few years of non-expansion is arguably very healthy as long as aggregate demand expands and is directed towards non-lending based activity.
ReplyDeleteThe assets and liabilities of British banks relative to GDP expanded a whapping TEN FOLD since about 1960. Is that an entirely healthy development? It means a big expansion in debts: not 100% healthy in my view.