This is moving even faster than a lot of us thought that it would. For weeks, I have been warning my readers about the coming credit crunch. When banks get into trouble, they start getting really tight with their money. That means fewer mortgages, fewer commercial real estate loans, fewer auto loans and fewer credit cards being issued. But I thought that it would take some time for the credit crunch to fully kick into high gear. Unfortunately, I was wrong about that. In fact, it is being reported that during the last two weeks of March bank lending in the United States “contracted by the most on record”…
US bank lending contracted by the most on record in the last two weeks of March, indicating a tightening of credit conditions in the wake of several high-profile bank collapses that risks damaging the economy.
In other words, we have never seen bank lending shrink faster than it did during the second half of March.
Wow. And it turns out that small banks are getting particularly tight with their money…
Commercial bank lending dropped nearly $105 billion in the two weeks ended March 29, the most in Federal Reserve data back to 1973. The more than $45 billion decrease in the latest week was primarily due to a a drop in loans by small banks.
The pullback in total lending in the last half of March was broad and included fewer real estate loans, as well as commercial and industrial loans.
As I have noted previously, small and mid-size banks provide the bulk of the commercial real estate loans in this country.
We are already starting to see prices for commercial real estate plunge, and now Morgan Stanley is warning that the drop that we will ultimately see could rival “the decline during the 2008 financial crisis”…
Investors have sharpened their focus on this sector, given regional banks’ significant share in CRE lending. Even before the banking-industry turmoil, however, CRE was facing risks from long-term trends, with remote work threatening the office sub-sector.
What’s more, the sector is now facing a huge “refinancing wall”: More than half of the $2.9 trillion in commercial mortgages will be up for refinancing in the next couple of years. Even if current rates stay where they are, new lending rates are likely to be 3.5 to 4.5 percentage points higher than they are for many of CRE’s existing mortgages.
Commercial property prices have already turned down, and Morgan Stanley analysts forecast prices could fall as much as 40%, rivaling the decline during the 2008 financial crisis. These kinds of challenges can hurt not only the real estate industry, but also entire business communities related to it.
A lot of people thought that I was exaggerating when I stated that we are heading into the worst commercial real estate crisis in our history. But I was not exaggerating one bit.
Of course the credit crunch that we are now experiencing will have enormous ramifications for the entire economy.
When consumers have access to less credit, they spend less money. And when consumers spend less money, businesses bring in less revenue and they start laying off workers. And when workers get laid off, they get behind on their debts. And that creates even more stress on the banks.
This new credit crisis threatens to spiral out of control, but Fed officials insist that everything is just fine. In fact, James Bullard seems convinced that interest rates should go even higher…
“Financial stress seems to be abated, at least for now,” Bullard told reporters Thursday after speaking at an event in Little Rock, Arkansas. “And so it’s a good moment to continue to fight inflation and try to get on that disinflationary path.”
The St. Louis Fed chief said he doesn’t think tighter credit conditions stemming from the recent banking turmoil will be substantial enough to tip the US economy into recession, noting that demand for loans is still strong.
Demand for loans may be strong, but the supply of credit is starting to dry up really quick.
Meanwhile, Americans continue to pull money out of the banks at a staggering rate…
Friday’s report also showed commercial bank deposits dropped $64.7 billion in the latest week, marking the 10th-straight decrease that mainly reflected a decline at large firms.
Every week that this happens, it is just going to cause banks to get even tighter with their money.
And bank economists surveyed by the American Bankers Association expect credit conditions to continue to tighten during the months ahead…
- The Headline Credit Index fell in Q2 to 5.8, decreasing 6.7 points to its lowest point since the onset of the pandemic. The reading indicates broad-based expectations for weaker credit market conditions over the next six months among bank economists, and banks are likely to grow more cautious about extending credit.
- The Consumer Credit Index fell 7.9 points to 5.8 in Q2. EAC members expect credit availability to deteriorate more than credit quality, though almost all expect both to decline. The sub-50 reading indicates that consumer credit conditions are likely to weaken over the next six months.
- The Business Credit Index fell 5.6 points to 5.8 in Q2. All EAC members expect business credit availability will deteriorate in the next six months, and most expect business credit quality to deteriorate. The sub-50 reading indicates that EAC members expect that overall credit conditions for businesses will continue to weaken over the next two quarters.
Just look at those numbers.
Any figure under 50 is bad, and those numbers are in the single digits.
In all the years that I have been writing, I have never seen anything like this.
So I am encouraging all of my readers to brace themselves for a massive economic avalanche.
A major credit crunch is already here, but most Americans still don’t understand that severe economic pain is dead ahead.
Coffee the Christian way: Promised Grounds
Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here. Article cross-posted from The Economic Collapse Blog.
Independent Journalism Is Dying
Ever since President Trump’s miraculous victory, we’ve heard an incessant drumbeat about how legacy media is dying. This is true. The people have awakened to the reality that they’re being lied to by the self-proclaimed “Arbiters of Truth” for the sake of political expediency, corporate self-protection, and globalist ambitions.
But even as independent journalism rises to fill the void left by legacy media, there is still a huge challenge. Those at the top of independent media like Joe Rogan, Dan Bongino, and Tucker Carlson are thriving and rightly so. They have earned their audience and the financial rewards that come from it. They’ve taken risks and worked hard to get to where they are.
For “the rest of us,” legacy media and their proxies are making it exceptionally difficult to survive, let alone thrive. They still have a stranglehold over the “fact checkers” who have a dramatic impact on readership and viewership. YouTube, Facebook, and Google still stifle us. The freer speech platforms like Rumble and 𝕏 can only reward so many of their popular content creators. For independent journalists on the outside looking in, our only recourse is to rely on affiliates and sponsors.
But even as it seems nearly impossible to make a living, there are blessings that should not be disregarded. By highlighting strong sponsors who share our America First worldview, we have been able to make lifelong connections and even a bit of revenue to help us along. This is why we enjoy symbiotic relationships with companies like MyPillow, Jase Medical, and Promised Grounds. We help them with our recommendations and they reward us with money when our audience buys from them.
The same can be said about our preparedness sponsor, Prepper All-Naturals. Their long-term storage beef has a 25-year shelf life and is made with one ingredient: All-American Beef.
Even our faith-driven precious metals sponsor helps us tremendously while also helping Americans protect their life’s savings. We are blessed to work with them.
Independent media is the future. In many ways, that future is already here. While the phrase, “the more the merrier,” does not apply to this business because there are still some bad actors in the independent media field, there are many great ones that do not get nearly enough attention. We hope to change that one content creator at a time.
Thank you and God Bless,
JD Rucker
