What credit crunch? Credit Suisse's chief US economist told us why fears of a severe pullback in lending are overblown — and why the US economy is well-positioned to avoid a recession
, which bundles indicators like manufacturing activity, unemployment claims, stock performance, home building permits, and credit conditions. It's at recessionary levels. Chief US Economist Ray Farris, this time is likely different. While Farris believes the risk of a recession is high, it's not his base case outcome.
Further, Farris asserts that the US economy didn't experience a"boom," but rather a mismatch in supply and demand dynamics. In the in the upper right corner of the chart below is the notch downward in loans and leases in the two weeks following the SVB and Signature Bank closures. But they've increased since the start of April. "The credit crunch is everywhere except in what's happening with credit. The credit crunch is one of these great assumptions," Farris said."You know it, I know it. It's kind of a Donald Trump type of thing. Everybody knows there's a credit crunch.
, which are historically low. They tend to rise in a recessionary environment when people lose jobs and therefore their ability to pay back loans.Farris says defaults and delinquencies are major drivers of a credit crunch, as banks have to write the loans off as losses.
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