Well, I wouldn't say I got the end of the balance sheet recession exactly right because I don't think it's completely over, but I think the gradual improvement is a sign that the dark days of no loan growth are moving behind us. Over the last few years I've repeatedly referred to the U.S. as "Japan on fast forward" and stated that the BSR would likely end by 2013-14. Considering all the moving parts here, I wasn't terribly far off (OK, I'll stop patting myself on the back now).
Anyhow, the latest Senior Loan Officer Survey from the Fed notes something that is entirely consistent with all of this:
In the April survey, domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in several loan categories over the past three months.
That's right. You know that loans create deposits and that loans are primarily a function of banks finding creditworthy customers. And that's precisely what's happening now. Balance sheets have improved, and as I said in 2011:
I think a private sector recovery can become self-sustaining in 2013 or so given the current trends in incomes and debt levels.
I think that's precisely what we're seeing now. So the next time an economist asks you who's steering the recovery, tell them it's not necessarily the Fed or the Treasury any longer, but the private sector finding its footing.