US Bank Credit Declining at Depression Rates

Bank lending in the U.S. is on a declining path not seen since the Great Depression.

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).

"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."

"The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."

One big issue I have with Obama and the Feds is that they are sending terribly mixed messages to banks. On the one hand, they want them to make more loans. But then populist rhetoric takes over and they don't want "risky lending" and want better capital ratios. These two desires don't mesh.