CREDIT: COMMERCIAL BANK LOANS & LEASES FALLING RAPIDLY
-- ABSTRACTED FROM: 04-13-17 Lance Roberts, of Real Investment Advise - "The Illusion of Liquidity" --
The chart below shows bank loans and leases as well as bank reserves held at the Fed. The precipitous drop is somewhat concerning. Commercial bank reserves held at the Fed have dropped by -20% from the peak of $2.79 trillion in 2014 to $2.23 trillion currently. Also, as shown, the drops in reserve balances has also corresponded to declines in 10-year rates as well. The recent drop in rates from 2.6% a month ago to 2.3% on Tuesday will likely see reserve balances decline in the next data update.
Furthermore, the year over year change in Commercial Bank loans and leases has dropped by almost half from the narrow range of 7.6% to 8.0% that prevailed from Jan. 2015 to Sept. 2016 to the current level of 3.8% currently which is at the level that preceded the past two recessions. Also, the annual change in Commercial Bank Deposits held at the Fed has dropped by more than one-half from the recent high of 10.3% in 2012 to 4.8% currently.