2/8/15: Credit and Growth: A Marriage Not Made in Haven

My recent post for @LearnSignal on the OECD report on the role of banks-intermediated credit in economic growth: http://blog.learnsignal.com/economics/oecd-credit-is-bad-for-your-economy.

23/3/15: Credit, Domestic Demand and Investment: Euro Area in Three Charts

Three interesting charts outlining the big themes in Euro area economy:

First the 'limping leg' of the euro recovery: credit. Chart below shows decomposition and dynamics in corporate credit, with Q1 2015 reading so far pointing to a very robust demand for credit, and (even more importantly) credit driven by fixed investment. This should provide some support for Domestic Demand, albeit at the expense of re-leveraging the economy via bank channel (as opposed to leverage-neutral equity or non-bank credit, such as direct debt issuance):

Source: @FGoria

The importance of investment uplift is hard to underestimate in the case of the euro area, as the next chart clearly illustrates:

 Source: @FGoria

And this translates into depressed Domestic Demand (C+G+I bit of the national accounts):

Source: @FGoria

The gap between U.S. and the euro area is understandable. But the gap between Japan and the euro area is truly shocking, once one considers the state of the Japanese economy and the sheer magnitude of monetary stimulus that Japan had to deploy to push its Domestic Demand up from 2011.

In simple terms, the above charts show some revival in the euro area fortunes. In more complex terms, one has to wonder what this revival hinges on. In my opinion, we are seeing a bounce in credit creation that is not sustainable given the state of the global economy (with global trade flows remaining weak) and the conditions of households across the euro area (with domestic consumption and household investment still weak). 

12/1/2013: Banks lending to private sector - Nov 2012

For much of the discussion about "Ireland is not [insert a euro 'peripheral' country name here]", here are comparatives in terms of banks lending to private sector in November. Predictably and as mentioned earlier on the blog, our lending is still contracting. On the 'positive' side, it is contracting less in Greece, Spain and Portugal for non-financial corporates, and less than in Greece, but more than in Spain and Portugal for households.

For the sake of my own physical and mental health, I am not going to give you a judgement of what this means. Draw your own conclusions.

Note: I just realised I forgot to link to the source on this.