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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

The Fed, interest rates, deficit spending, and loan growth

Posted by WARREN MOSLER on September 22nd, 2009


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Loan growth is also to some degree a function of interest rates. Lower rates = lower loan growth due to the reduced compounding of interest for many borrowers.

Additionally the increased federal deficit spending is restoring income and savings of financial assets, reducing the nedd to borrow to sustain spending.

Fed Effort to Stoke Growth May Be Undermined by ‘Tight’ Credit

By Scott Lanman

Sept. 22 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke’s efforts to stoke a U.S. economic recovery may be undermined by the central bank’s other goal of restoring the banking system to health.

A Fed report released last week shows banks had $6.85 trillion of loans and leases outstanding to businesses and households as of Sept. 9, down for a fifth straight week and below the record $7.32 trillion in October 2008. Real estate loans, the biggest portion, stood at $3.79 trillion, up $7.5 billion from the prior week while down from a peak of $3.9 trillion.


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6 Responses to “The Fed, interest rates, deficit spending, and loan growth”

  1. hoover printing presses Says:

    I am watching CSpan now about the G20. Many of the callers say they “want” a trade war with China so they can get thier jobs back. I am confused Warren, how does their useless shopping machine princess daughter go waste her life buying louis vitton bags if we start having trade wars? Why do they want to WORK when they can sit back and live la vida loca while china man works? Many of the callers seem to quote the Bible and how GOD wants them to use thier hands, and say ideas like yours Warren are Anti-Christian about sitting back being a lazy shopping machine while some other asian human works their little fingers to the bone.

    Reply

    Matt Franko Reply:

    Dissent,
    Rather, it looks like you have the AFL-CIO going to war against “The People’s Manufacturing Co.” LOL. What happened to “Workers of the world unite!”?

    Reply

  2. deficit terrorist Says:

    The IMF seems to have turned into a huge deficit terrorist, what is the USA to do? When she needs deficits the most, everyone is saying no no no.

    http://www.econbrowser.com/archives/2009/09/we_shoulda_run.html

    Reply

  3. warren mosler Says:

    vote for me in 2012! and make a contribution at mosler2012.com thanks!

    Reply

  4. deficit terrorist Says:

    Warren, I am going to do far more than just vote for you, I am moving to the USVI and going to donate my time and money to help you get the word out – I told you that last year and I meant it.

    Reply

  5. warren mosler Says:

    see you soon!

    Reply

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