In each case, the numbers suggest banks aren't making new loans. At this stage in the business cycle, this is predictable.
The question now is when will banks find borrowers with the credentials to justify lending. Paterson believes that process has already begun, and that loans will start to grow in the QII of 2010.
First, the M1 numbers.
This is the raw data, showing growth.
Next, the percentage change since last year. Growth is there, but not enough to keep the economy fueled.
Here are the M2 numbers.
First the total.
Next, percentage change from last year.
Finally the MZM numbers.
Here's the raw data. Again, there's growth, but not enough to fuel the economy.
Next, the percentage change since last year. Banks are not lending.
Summary
Without loans, businesses rely on earnings to fuel future growth. The economy is now at a point when earnings will be insufficient to finance future expansion.
Banks will now begin to find lending opportunities for those firms with credit worthy balance sheets and projects. Lending will begin to increase, and when the year is out, the money supply will be growing again.
