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Exploring the Idea "There's Never Been a Better Time to Borrow"

Interest rates are low, does that mean it's a good time to borrow?
Never a better time to borrow

Here is a Tweet that caught my eye in a big way. 

Two Tweet Statements

  1. Real yields on junk debt going negative is way more insane than anything going on in random meme stocks or scamcoins, because of the absolutely enormous amounts of money involved.
  2. Also: There’s never ever been a better time to borrow money. Ever ever. Real yields on junk debt going negative is way more insane than anything going on in random meme stocks or scamcoins, because of the absolutely enormous amounts of money involved.

Real yield on junk debt going negative is indeed crazy. But point #2 needs a closer look.

Never a Better Time to Borrow? 

If it is indeed the best time ever to borrow, then how does one explain bank loans?

Fed's Balance Sheet, Bank Deposits, Bank Loans Detail 2021-05

It seem to me that if there was never, ever a better time to borrow, then corporations would be doing more of it.

Those chart does not include many mortgages (banks got out of that business), nor does it include huge corporations able to access the bond market directly.

Instead, it does include small to midsize private corporations dependent on bank loans. 

They do not want to borrow because they see no productive use of money.

What About Mortgages?

Q: People are buying houses like mad, but is now really the best time to do so?
A: Certainly not! 

Case Shiller 10-City Metro 2020-11

The best time to take out a mortgage was 2011-2012.

That chart is stale. I need to update it and also what real interests are based on accurately including housing.



Housing and speculation are all the Fed has. And part of housing is speculation including FOMO, fear of missing out. 

Zoomers prefer to call it YOLO. You only live once. On the YOLO theory, Dogecoin is a great buy. 

Perhaps Dogecoin goes to $5. If so, hooray. If it goes to zero, so what? It's YOLO. There's always something else to speculate in and make up losses.

Hello Bank, I Want Money for Dodgecoin!

So, Mr. Borrower what do you really want this money for? 

One of Two Things

  1. Banks are not happy with the answer to that question. 
  2. Alternatively, businesses have decided this is a poor time to borrow and are not even attempting to get loans.

If you are a corporation struggling to stay alive and have access to the junk bond market, then yes, you are in luck.

Otherwise, what the hell are you going to do with the money? 

It seems that rational behavior has either set in with banks on the lending side or would be borrowers on the other side of the same coin. 

Charts That Should Scare the Pants Off the Fed (And Probably Do)

I discussed bank lending in more detail in Charts That Should Scare the Pants Off the Fed (And Probably Do).

The Fed is desperate to stimulate lending and failed. The ECB failed as well. So has the Bank of Japan. 

All that remains is stimulus and speculation. But stimulus wears off quickly as noted in Impact of Three Rounds of Stimulus on Retail Spending Dollars in Pictures

That leads us to the proper conclusion as discussed at length in Inflation Then Bubble Bust Deflation: A Video With Daniel Lacalle


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