Angst rightly blows across America’s financial landscape when consumers’ use of credit seems to be plunging into the excessive range.
However, that landscape experiences angst when use of credit is anemic, because banks can’t charge interest on money until it is drawn from lines of credit or through loan products.
That means that banks are not making money on the funds that they have available for borrowers, and their earnings bottom line suffers to whatever extent.
Use of money or credit is therefore a balancing act that is monitored nonstop by the nation’s financial gurus — those in the top offices of banks right up to the Federal Reserve.
Amid small businesses’ — and many larger ones’ — current anxiety here and across the rest of the country stemming from the uptick in COVID-19 cases, particularly the highly transmissible Delta variant, a situation persists that, while at this time somewhat troubling to some banks and financial analysts, might be a harbinger of something better ahead for the economy in general.
The best advice is to stay tuned.
Here is what is going on:
As reported by the Wall Street Journal earlier this month, businesses across America are sitting on record amounts of unused credit from U.S. financial institutions.
“For large banks with a bigger concentration on commercial lending, there has been an average 21 percent increase in unused commercial and industrial credit compared with the prior year, according to a review of available filings by Janney Montgomery Scott analysts,” the Journal reported.
The nation’s two largest banks — JPMorgan Chase & Co. and Bank of America Corp. — at the end of June together had nearly $1 trillion in unused commitments to lend to corporate clients, up 20 percent from a year ago, the Journal said.
Again, that was nearly $1 trillion not earning interest for the banks.
Now, about that possible harbinger of something better:
According to the Journal, bank executives are saying that their business clients have, in recent months, ramped up requests for credit lines that they can draw upon quickly for inventory, labor or expansions, when the time is deemed right on the economic front.
Bankers are telling the Journal that businesses seem poised to turn on the spending spigot, which would help the economy shoot higher.
Bankers embrace the opinion that untapped credit is indicative that corporate clients are optimistic about the trajectory on which the economy is moving.
In an Aug. 5 report, the Journal noted that many of the requests for bigger credit lines were coming from companies dealing with industrial and food products, wholesale supply and health care.
How what is playing out on the national scene will specifically affect this region can only be a matter of conjecture at this time. But, tentacles from what happens in the big cities and with the largest borrowers do reach smaller towns like those in the Juniata Valley.
Angst is a basis for focus, even if not necessarily for actual remedial actions.
Even the realities surrounding COVID-19 must not distract from vigilance and acknowledgment of what is evolving or entrenched, and how that is impacting the nation and its people’s well-being — financial or otherwise.