“Banks are becoming more cautious about lending”
And the implications are bigger than just getting a loan
by Bob Stokes
Updated: November 10, 2022
Robert Prechter's Last Chance to Conquer the Crash discusses the psychological aspect of a deflation:
When the trend of social mood changes from optimism to pessimism, creditors, debtors, investors, producers and consumers all change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending.
Evidence of that developing financially conservative mindset is seen in this chart from our just-published November Global Market Perspective (commentary below):
Eurozone stock market indices have declined this year indicating that the trend in social mood is negative. This trend towards ever more caution can be seen in the chart, from the latest Euro Area Bank Lending Survey released by the European Central Bank. It shows that a net 19% of banks are tightening credit standards, up from a neutral zero at the end of last year, meaning that banks are becoming more cautious about lending.
Just know that there's room for many more banks to tighten credit standards.
What does a rising trend in tightening credit standards mean? Let's return to the November Global Market Perspective:
As credit conditions become ever tighter, expect defaults to rise and debt to deflate.
And, speaking of defaults, here are some recent news items:
- Private lender cuts Canada mortgage business as defaults rise (The Business Times, Oct. 30)
- Ally Financial Inc. ... saw charge-offs for retail auto loans quadruple in the third quarter. (Bloomberg, Oct. 21)
- Leveraged Loan Default Volume In The U.S. Has Tripled This Year (Forbes, Oct. 2)
As social mood continues to grow more negative, expect more defaults in various sectors around the world.
Stay on top of these developments with our monthly Global Market Perspective by following the link below.
Historic Elliott Waves “In Progress”
The Elliott wave price patterns of major global stock indexes are sending an epic caveat.
Our just-published November Global Market Perspective analyses and provides forecasts based on these patterns.
For example, here's a snippet about a major European stock index:
The next significant move will... draw prices thousands of points lower.
You also get forecasts for the major U.S. and Asian-Pacific stock indexes -- as well as others in Europe.
Our Global Market Perspective also covers cryptocurrencies, forex, metals, energy, bonds, economies and much more.
Follow the link below and you can have forecasts for 50-plus financial markets on your screen in just a few minutes.
A “Freight Train of Grains” Didn’t Cause Soybeans’ Recent Price Crash. So… What Did?
"Crash," "sink," "runaway freight train," and ever-lowering "limbo pole" are a few of the phrases used to describe the May selloff in grains, particularly soybeans. But before you blame the "bombshell" May 12 USDA supply/demand report for the slide, you'll want to read this first.
Commercial Real Estate: Prepare for a Potential Global Calamity
A lot of the commercial real estate market is faced with a decline in liquidity and falling values. The specter of defaults looms large. In at least one region of the world, there are reminders of the dark days of Q1 2009, as revealed by this chart.
'How people FEEL is how they ACT'
Like all ideas that make you want to slap yourself on the forehead and scream "How didn't I think of that!", the idea behind socionomics is simple: Social mood impels social action. When you know social mood's trend, you can forecast everything from the stock market to culture to politics and more. So, how then do you define the social mood trend? Watch our Head of Global Research touch on that in this video.
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