Bridgewater on the state of U.S. credit creation:
Bridgewater Daily Observation
Several years removed from the depths of the financial crisis, the US credit system has now healed to the point where nearly all of the credit pipes are back to operating, albeit at a slower rate of credit creation, and most spreads have returned to pre-crisis levels. Banks, the largest source of credit to the economy, are fully recovered; their capital levels have returned to pre-crisis levels and strong deposit growth has made funding inexpensive and more reliable. Consistent with their health, bank lending surveys show an increasing desire to lend. In fact, the ongoing printing of money and bond purchases by the Fed and other central banks has created a flow of liquidity and a search for yield that is showing up in the gradual reopening of a number of credit pipes that have been closed for a few years. In the capital markets, corporate issuance is at historically high levels and even higher beta markets like CLOs and CMBS are returning. While all of this bodes well for qualified borrowers, many households remain underwater or are unemployed, limiting their ability to borrow. This large number of impaired borrowers continues to limit the rate of aggregate credit growth so that a return to pre-crisis borrowing levels is unlikely.
So the recovery is on a pace, it just may not be a very brisk pace.
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury