The more you examine this credit crunch, the stranger it gets.
Consider, for example, recent net capital issuance. Over the last three months, capital markets have raised quite a bit of new cash. In fact, recent volumes easily exceed the pre-credit crunch numbers. In July alone, the markets raised almost ₤50 billion.
Who is raising this money? Basically, this capital issuance is almost entirely confined to the financial sector, with banks and off-balance sheet vehicles raising approximately equal amounts. As for non-financial corporations, on a net basis, these firms actually repaid debt or withdrew equity. So the credit crunch does appear to be working its mischief in the real economy.
What exactly did financial institutions issue in July. It almost entirely bonds. A little equity was also raised, but as I said, all the action was with fixed income products.
I won't pretend that I can make much sense of these numbers. Superficially, I can see two possible explanations. The first suggests that everything is well, and that capital markets are operating as they should. However, that is not what I read in the financial papers.
The second explanation suggests that this increase in capital issuance is, in some way, a product of the credit crisis. This bond issuance could be some form of financial merry-go-round between banks and their off-balance sheet vehicles, covering up the cracks of steadily deteriorating balance sheets.
If anyone can do a better job at explaining these numbers, please go ahead. That is what the comments link is there for.