The latest consumer-credit data showed a slowing in the growth of the borrow-to-spend trend that had re-appeared through the holiday shopping period. This deceleration signals the deleveraging of the consumer is back and as the following charts from Morgan Stanley shows once people start saving historically, they have tended to remain saving; and that in the kind of low-/no-growth environment (or more specifically a balance sheet recession) we see a lack of credit demand even as credit availability is high. The momentum of saving and the correct focus on debt minimization as opposed to profit- (or living-standard) maximization will eventually outweigh the ever-increasing need for dollar-debasement money-printing flow to maintain the social market status quo. Add to this deleveraging concern the fact that Europe is seeing bank lending contract absolutely (notably weaker than in the US for now) amid tighter lending conditions and this is just another example of the cloggage in the Fed/ECB's transmission channels in this environment.
Long-term trends in loan/deposit ratios show human's tendency for long-term frugality (as opposed to long-term exuberance as seen in the decades before Japan's crises)...
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And as if further evidence of the breakage of Fed transmission channels were needed. In a balance sheet recession, people will tend to minimize debt no matter how easy and cheap credit is available. The Japanese situation has not been allowed yet in the US but once again serves as a reminder of the basic human response to such a wealth shock in cleaning up their balance sheet.
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It seems Europe is leading this charge - no matter how hard the ECB tries...
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And is it any wonder when lending is uneconomic for European firms...
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You can lead a horse to water... but a Japanese or European household just won't drink - are they just a few years ahead of the US in the cycle of reality? Or is the Fed/ECB/BoJ's financial repression (and Treasury's housing plans) enough to keep forcing non-deleveraging?