Polemic is a discourse of conflict, whose effect depends on a delicate balance between the requirements of truth and the enticements of anger, the duty to argue and the zest to inflame. Its rhetoric allows, even enforces, a certain figurative licence. Like epitaphs in Johnson’s adage, it is not under oath.
And these could offer useful signals about the state of the US economy, and whether Donald Trump’s deregulation and tax cut pledges are still unleashing animal spirits.*
Animal Spirits is Keynes’ highfalutin term, that transmogrified into Greenspan’s ‘Irrational Exuberance’ : this just speculation on my part, but it seems relevant to make certain connections across historical time. Yet this is my second reading of Ms. Tett’s essay and I am in a quandary. note the headline and sub-headline.
Headline: Ham-fisted banking rules spark the creativity of lenders
Sub-headline : Real credit growth and innovation occur in the world of private capital
But as investors and regulators watch names such as JPMorgan and Citigroup, they should also monitor the nameless world of non-banks as well. For one little secret about finance today is that the banking sector is not the really interesting game in town; instead, the real credit growth — and innovation — is now occurring in the world of private capital.
This overturns the layperson’s idea of how a bank is supposed to work. For financiers, however, it is the new norm. The HPS fund seems to be the biggest to date — although it is hard to tell precisely because the “private” market is opaque. But HPS has other, smaller funds. So do most of the other big private equity and hedge fund players, with groups such as Apollo and BlueBay having also created hefty multibillion-dollar vehicles. Consultants such as Prequin reckon that the overall private debt market is already $600bn in size; the industry expects this to hit the trillion-dollar mark in 2020, presuming that the heady growth continues.
And it should provide a broader warning sign too: if you want to track what is really happening to credit today, in a financial system awash with cash, do not just look at the headline institutions. Regulators and investors alike should learn the lessons from 2008, and look at what is happening in the murky “shadow” banking world, be that in China, America or anywhere else. JPMorgan’s peculiar financial child — or grandchild — has become more interesting than JPMorgan.