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U.S. bank lending slumps by most on record in final weeks of March

finance.yahoo.com

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Re: U.S. bank lending slumps by most on record in final weeks of March

#21

Post by User23 »

kneebonian wrote: post #14
SkipperCat wrote: post #11

Earlier quoted context omitted.

But where will that money go? It's not going to get put into the caskets of deceased boomers. It will be inherited by Gen-X and Millennials who will do something with that money. Once that money has been dumped into the economy, it's going to slush around for a long time. Maybe there will be some massive capital destruction event but I can't think of anything potentially imminent.

The problem is that when you put a dollar in savings or a dollar in the stock market you are actually "creating" an extra dollar from an economic standpoint. If I put a dollar in the bank the bank can then use that dollar to loan to someone else, but I still have "my" dollar. So where there was 1 dollar there are now 2. Once we start pulling money out of investment vehicles we aren't only removing that money but also…

> Thus the boomers pulling out for retirement result are the capital destruction event.

No that’s just an asset swap. There’s no aggregate balance sheet contraction. Now bankruptcies on the other hand are very much debt deflation as is loan repayment.

Re: U.S. bank lending slumps by most on record in final weeks of March

#22

Post by JumpCrisscross »

kneebonian wrote: post #2

The days of cheap capital are over, and not because of the Fed. The largest generation, boomers, are now retiring. Up until now they've been pumping money into the economy and the investing with their 401k and things like that. Now that trend is reversing as they retire they are taking money out of the 401k, out of their life savings, at the same time their purchasing power is decreasing. The end result is a lot less…

> they are taking money out of the 401k, out of their life savings, at the same time their purchasing power is decreasing

Withdrawing from a 401(k) has no real effect. Spending the proceeds does. The decrease in purchasing power blunts the restrictive effects of those savings being spent with no corresponding contemporaneous production.

> a prolonged slump is coming

Careful. America is uniquely tuned to benefit from migration. The present trend is professional money managers, afraid to admit the Fed is paying more than they’ve performed, continuously forecasting an imminent recession (and presumed rate cuts).

Re: U.S. bank lending slumps by most on record in final weeks of March

#23

Post by rtkwe »

kneebonian wrote: post #14
SkipperCat wrote: post #11

Earlier quoted context omitted.

But where will that money go? It's not going to get put into the caskets of deceased boomers. It will be inherited by Gen-X and Millennials who will do something with that money. Once that money has been dumped into the economy, it's going to slush around for a long time. Maybe there will be some massive capital destruction event but I can't think of anything potentially imminent.

The problem is that when you put a dollar in savings or a dollar in the stock market you are actually "creating" an extra dollar from an economic standpoint. If I put a dollar in the bank the bank can then use that dollar to loan to someone else, but I still have "my" dollar. So where there was 1 dollar there are now 2. Once we start pulling money out of investment vehicles we aren't only removing that money but also…

It doesn't just disappear though, the money goes into annuities/bonds or into bank accounts as cash. The funds that get taken out to spend then move through the economy into other bank accounts they don't just disappear into thin air.

Re: U.S. bank lending slumps by most on record in final weeks of March

#24

Post by loeg »

throwaway6734 wrote: post #13
n00bskoolbus wrote: post #6

Earlier quoted context omitted.

Lets just hope it's done by the government and not by private corps gouging people who just need care.

The government will be gouging the young to pay for it. From the generation that brought you Ronald Reagan, boomers will have no trouble bankrupting the youth to pay for their entitlements

Washington state recently added a new youth to elderly wealth transfer program under this guise (LTC).

Re: U.S. bank lending slumps by most on record in final weeks of March

#25

Post by canadiantim »

anonporridge wrote: post #17
analyst74 wrote: post #3

Earlier quoted context omitted.

Coincidentally, I just saw two separate job ads on the subway looking for caregivers. Maybe the next booming sector would be taking care of retired boomers.

Retiree wealth mining is the next great gold rush! One interesting scheme I recently came across is an assisted living home that doesn't take regular payments. Instead, they have their residents sign over their entire net worth at the event of their death, leaving nothing for their inheritors. The tradeoff is that they get to stay for as long as they live. Of course, this scheme has some obvious perverse incentives f…

Those are some terrifying perverse incentives, jeez

Re: U.S. bank lending slumps by most on record in final weeks of March

#26

Post by 0xbadcafebee »

kneebonian wrote: post #2

The days of cheap capital are over, and not because of the Fed. The largest generation, boomers, are now retiring. Up until now they've been pumping money into the economy and the investing with their 401k and things like that. Now that trend is reversing as they retire they are taking money out of the 401k, out of their life savings, at the same time their purchasing power is decreasing. The end result is a lot less…

Controversial opinion: The US's buying power has led to global negative externalities directly tied to the cost-cutting measures needed to drive perpetually increasing profits and population growth, most of which was fueled by a strong growing economy. A long-term slump might lead to a net reduction in negative externalities, assuming there is a refocus on more efficient resource allocation in order to safeguard the health, education, safety, and employment of citizenry and environment.

Re: U.S. bank lending slumps by most on record in final weeks of March

#27

Post by loeg »

s1artibartfast wrote: post #15
n00bskoolbus wrote: post #6

Earlier quoted context omitted.

Lets just hope it's done by the government and not by private corps gouging people who just need care.

I think that's a pretty unrealistic hope. I don't think the government is going to spin up up millions of workers to be in home caregivers and start building government funded nursing homes. That's not to mention the budget implications is such care. Some states are looking at or implementing new mandatory Insurance programs nursing home care, but these are far too late for Boomers to pay into them in a meaningful wa…

> Some states are looking at or implementing new mandatory Insurance programs nursing home care, but these are far too late for Boomers to pay into them in a meaningful way

This has not stopped Washington state, for example, from allowing Boomers to benefit from these programs without paying into them in a meaningful way.

Re: U.S. bank lending slumps by most on record in final weeks of March

#28

Post by JumpCrisscross »

kneebonian wrote: post #14
SkipperCat wrote: post #11

Earlier quoted context omitted.

But where will that money go? It's not going to get put into the caskets of deceased boomers. It will be inherited by Gen-X and Millennials who will do something with that money. Once that money has been dumped into the economy, it's going to slush around for a long time. Maybe there will be some massive capital destruction event but I can't think of anything potentially imminent.

The problem is that when you put a dollar in savings or a dollar in the stock market you are actually "creating" an extra dollar from an economic standpoint. If I put a dollar in the bank the bank can then use that dollar to loan to someone else, but I still have "my" dollar. So where there was 1 dollar there are now 2. Once we start pulling money out of investment vehicles we aren't only removing that money but also…

> I put a dollar in the bank the bank can then use that dollar to loan to someone else

This isn’t how banks work. When “a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money” [1]. Loans create deposits, not vice versa.

[1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Re: U.S. bank lending slumps by most on record in final weeks of March

#29

Post by dangwhy »

kneebonian wrote: post #2

The days of cheap capital are over, and not because of the Fed. The largest generation, boomers, are now retiring. Up until now they've been pumping money into the economy and the investing with their 401k and things like that. Now that trend is reversing as they retire they are taking money out of the 401k, out of their life savings, at the same time their purchasing power is decreasing. The end result is a lot less…

> The largest generation, boomers, are now retiring.

I know bunch of family who've done this. All ski/mountain towns have now turned into de-facto retirement communities with younger workers often commuting 2-3hrs to their job.

Re: U.S. bank lending slumps by most on record in final weeks of March

#30

Post by noughtme »

JumpCrisscross wrote: post #22
kneebonian wrote: post #2

The days of cheap capital are over, and not because of the Fed. The largest generation, boomers, are now retiring. Up until now they've been pumping money into the economy and the investing with their 401k and things like that. Now that trend is reversing as they retire they are taking money out of the 401k, out of their life savings, at the same time their purchasing power is decreasing. The end result is a lot less…

> they are taking money out of the 401k, out of their life savings, at the same time their purchasing power is decreasing Withdrawing from a 401(k) has no real effect. Spending the proceeds does. The decrease in purchasing power blunts the restrictive effects of those savings being spent with no corresponding contemporaneous production. > a prolonged slump is coming Careful. America is uniquely tuned to benefit from…

Wouldn’t withdrawing from your 401k and transferring it to a checking account limit the pool of funds available for equity investment and move it into lower risk assets?
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