Money matters, but credit counts - Follow credit and not just central banks

 

Money matters, but credit counts - Henry Kaufman 

There is significant focus on Fed monetary policy - quantitative easing, tapering, the balance sheet, rate increases, forward guidance, and objectives like FAIT, but these all should tie back to credit. 

How much credit will be extended, what will borrowers need, and what will be the risks to creditors? These are all the questions that must be addressed when thinking about the real economic impact of monetary policy. Simply put, does monetary policy facilitate the extension of credit for productive growth?

There is a wealth effect, but the credit effect, the use of borrowed funds to provide future growth, moves economies. Right now, whether total outstanding debt or C&I loans, there is not demand for credit and not of loans being made relative to the growth in the Fed balance sheet.