squark62

Paul Krugman sees the difficult thaw in the credit market and wonders, if banks have such excess reserves, what's wrong with old-fashioned lending? Why does the Fed's policy answer seem to be to go back to shadow banking?

high unemployment levels is probably the biggest reason why banks aren't lending to the consumer. besides, we're saving at a rate well above recent norms. besides housing, there doesn't appear to be much of a market for consumer debt. also, if unemployment keeps growing, small business payrolls don't need to be floated unless their business is growing. not many small business growing gang busters right now. when unemployment & savings rates come in, consumer debt market will expand.