Biden’s Gift to the Climate Movement – A Deep Economic Recession?

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Watts Up With That?

Essay by Eric Worrall

President Biden, image modified. AFGECC BY 2.0, via Wikimedia Commons

h/t ResourceGuy – As key economic indicators redline, greens who believe the key to addressing climate change is economic “degrowth” might be about to get their wish.

US Bank Lending Slumps by Most on Record in Final Weeks of March

Alex Tanzi
Sat, April 8, 2023 at 8:06 AM GMT+10·

(Bloomberg) — US bank lending contracted by the most on record in the last two weeks of March, indicating a tightening of credit conditions in the wake of several high-profile bank collapses that risks damaging the economy.

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Commercial bank lending dropped nearly $105 billion in the two weeks ended March 29, the most in Federal Reserve data back to 1973. The more than $45 billion decrease in the latest week was primarily due to a a drop in loans by small banks.

The pullback in total lending in the last half of March was broad and included fewer real estate loans, as well as commercial and industrial loans.

Friday’s report also showed commercial bank deposits dropped $64.7 billion in the latest week, marking the 10th-straight decrease that mainly reflected a decline at large firms.

The slide in lending follows the collapse of several firms including Silicon Valley Bank and Signature Bank.

The banking crisis has made a recession more likely, according to JPMorgan Chase & Co.’s Jamie Dimon. The bank’s chief executive officer said in an annual letter that the failures have “provoked lots of jitters in the market and will clearly cause some tightening of financial conditions as banks and other lenders become more conservative.”

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Why am I talking up the risk of an imminent recession?

My concern is so much of what Biden has done to date has made things worse. As inflation rose, Biden passed the misnamed “Inflation Reduction Act“, pouring fuel on the inflation fire. The Biden administration remains committed to wrecking the USA’s extractive industries, with nuisance bureaucratic attackspermit cancellationsexcessive regulation, and lease auction suspensions, deferrals or cancellations. And their blanket guarantee of bank deposits, while reducing the risk of further bank runs in the short term, has increased moral hazard and the risk of large scale resource misallocation, by leaving badly managed banks which should be allowed to fail in the hands of incompetents and criminals.

At every economic inflexion point I can think of, the approach of the Biden administration has been short term and reactive rather than strategic. For example, their decision to drain just under half the strategic oil reserve, without doing anything substantial to improve US oil production and energy security, lowered pump prices a little in the short term, but did nothing to address the underlying problems.

It is not too late. If the US government pulled back on excessive spending, stopped sucking bond markets dry with their debt funded climate extravagances, and did everything in their power to ease restrictions on drilling, to lower the cost of energy and defuse the ticking inflation bomb, confidence could be restored. The US economy might be able to grow its way out of the inflation trap, without raising interest rates and taxes to economy killing levels.

Over to you, President Biden.