US Private Bank Credit Contracting

New monetary policies like QE have muddied the water somewhat when looking at monetary aggregates like M2.  We have a simple adjustment we make to M2 to improve the optics on bank credit.  We remove from published M2 stats the excess reserves commercial banks have on deposit with the FRB to understand trends in private credit.  The result of this exercise is in the chart below.  After peaking at almost +15% year over year last June, ommercial bank credit to the private sector of the US is now declining year over year. Historically this bank deleveraging is bad news for stocks.