From the data itself, you cannot get determine how much of the reduction is the result of borrowers choosing to repay their debt (after all, why would a business facing significant excess capacity want to increase their debt?) or banks tightening their lending and turning borrowers down (and surely they would all be more risk averse than they were a couple of years ago). I think that it is safe to say that it is in fact a combination of both, but many under-estimate the contribution of the former, in my view.

12 comments just take the chart at face value; while 1 poster suspects that there is something fishy with the chart, but failed to perceive what it was. It came close, though: it was an undefined something, but related to the y axis.

Interestingly, the interpretation that seems to prevail is that banks are not lending, as opposed to borrowers re-paying their debts.

I would say that the private sector is certainly still deleveraging. Here in Australia for example, 2008 and 2009 saw a significant amount of corporate equity raising rather than borrowing.

Yes, the first chart was published here.

“Both of these charts reveal an economy that certainly remains unhealthy and lending volumes are still declining.”

So, the Quarterly Changes in US Commercial and Industrial Loans chart is the variation of a net balance (gross loans minus loan repayment), right?

“we can take some comfort from the fact that the rate of decline is diminishing from the worst point of the third quarter of 2009″.

So, it has been improving in the last 3 quarters. In other words: the private sector has been deleveraging since early 2009. Not so much now.

That’s certainly interesting and promising. But it still doesn’t look too good.

But, let me ask you this: is there any reason to believe that now the private sector is starting to get new loans (as opposed to just repaying less loans)?

I suppose this data does not include mortgages and credit cards, does it?

Is there any similar data relating to the UK and Australia?

“The moral of the story is that charts can mislead as easily as words and should always be treated with caution”

Yes, they sure can. Funny that you should mention this, Stubborn. I am also interested in Lies, Damn Lies and Statistics. :)

Was the first chart actually published?

Cheers,

Marco

PS: Very clever JamesGlover’s observation. I hadn’t thought of that!

JamesGlover: something along those lines is a good idea. I was thinking of giving an example where the moving average drops not because the latest month drops, but because a large increase a year ago drops out of the moving average window….next time!.