The credit crunch in the wake of March’s bank failures will likely worsen. According to veteran market strategist David Roche, as financial conditions tighten, up to 40% of the US economy could be squeezed.
And that crunch is only set to intensify, Roche said, as central bankers now face a difficult balancing act of loosening monetary policy to prevent more banking problems while still trying to keep policy tight enough to control inflation.
It spells trouble for a good part of the US economy, particularly for “small-town” sectors, like services, hospitality, construction, and small- to medium-sized businesses.
That’s because smaller regional banks finance over half of all lending in these spaces, Roche said, though those areas make up around 35%-40% of total output in the economy.
In the past few weeks, banks have tightened credit the most they have ever. The Fed has tightened monetary policy and hiked interest rates aggressively in the past year to control inflation.
Officials have said rates will continue to remain restrictive in 2023 despite the recent banking turmoil, with markets now pricing in another 25 basis points from central bankers in May.
Proverbs 19:17 He that hath pity upon the poor lendeth unto the LORD; and that which he hath given will he pay him again.
Proverbs 22:9 He that hath a bountiful eye shall be blessed; for he giveth of his bread to the poor.
Proverbs 28:27 He that giveth unto the poor shall not lack: but he that hideth his eyes shall have many a curse.
Matthew 25:40 And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.
Matthew 25:41 Then shall he say also unto them on the left hand, Depart from me, ye cursed, into everlasting fire, prepared for the devil and his angels:
Matthew 25:42 For I was an hungred, and ye gave me no meat: I was thirsty, and ye gave me no drink:
Matthew 25:43 I was a stranger, and ye took me not in: naked, and ye clothed me not: sick, and in prison, and ye visited me not.
Matthew 25:44. Then shall they also answer him, saying, Lord, when saw we thee an hungred, or athirst, or a stranger, or naked, or sick, or in prison, and did not minister unto thee?
Matthew 25:45 Then shall he answer them, saying, Verily I say unto you, Inasmuch as ye did it not to one of the least of these, ye did it not to me.
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