Over the weekend I posted an interview with Ray Dalio in which he declared that “deleveraging” was the number one theme he was using as a basis for all of his investing activities. I’ve been writing about this idea and the “balance sheet recession” for nearly 2 years now.
The chart above demonstrates just how deleveraging is working right now from the banking side of the equation. It shows the ratio of loans to deposits at commercial banks. Clearly, there aren’t many loans being made right now relative to the cash customers continue to deposit.
Without this kind of credit creation it’s going to be very difficult for the economy to really get going at any kind of consistently healthy clip.

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