Time in reverse

12 July 2012 By Martin Hutchinson

In the 1930s there was a huge decline, a small recovery and then a lesser drop. This time, the pattern may be reversed. A modest decline has been followed by a tepid recovery – and more risky debt excess. Another crash could lead the world’s economies off a steep cliff.

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According to the Federal Reserve Flow of Funds Accounts, the annual increase in domestic U.S. nonfinancial debt was 3.1 percent in 2009, 4.1 percent in 2010, 3.6 percent in 2011 and 4.7 percent in the first quarter of 2012. The comparable percentage increases in nominal U.S. GDP were 0.1, 4.7, 3.8 and 3.9 percent.
Total bank lending in Brazil rose by 18.1 percent in the year to April. In Turkey, bank credit’s year-on year increase in April 2012 was around 40 percent for households and 30 percent for business. Russian credit growth in the year to April 2012 ran at around 20 percent, while the average credit growth in the 3 years to April 2012 was around 20 percent in China, according to BIS data.

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