Q. Are banks not lending, or borrowers not borrowing?
Ans. Both.
The money base has expanded rapidly, but falling monetary velocity has offset that expansion. During this period, banks have tightened lending standards (falling consumer lending), and credit worthy borrowers have been reluctant to take on more debt (more interested in paying debt down and repairing their market ravaged balance sheets).
The result has been buoyant asset markets as banks have redeployed their excess reserves to proprietary trading activities.
This can't continue ad infinitum. At some point, credit markets and the economy will normalize.
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