2010-11-09

Credit Deflation is the name of the game with Small Businesses

Yesterday, the Fed reporter that consumer credit was deflating abruptly. Today, the NFIB is reporting that the credit deflation trend that set up many months ago for the US small businesses is still the name of the game:
Overall, 91 percent reported that all their credit needs were met or that they were not interested in borrowing. Nine percent reported credit needs not satisfied, and a record 52 percent said they did not want a loan (13 percent did not answer the question and might be presumed to be uninterested in borrowing as well). Only three percent reported financing as their number one business problem. However, 30 percent of the owners reported weak sales as their top business problem, a major cause of the lack of credit demand observed in financial markets. A near record low 31 percent of all owners reported borrowing on a regular basis. Reported and planned capital spending are at 35 year record low levels, so fewer loans are needed. Those looking for loans predominately are looking for cash flow support, not funds to expand or hire.
[...]
Quantitative is not going to do anything for the economy as people nor companies want to borrow. It's not a matter of interest rates; they simply don't want to borrow.
Actually, let me rephrase.

Quantitative easing is not going to do anything positive for the economy. As usual with governments, central planners, and those who believe in a free lunch, their destructive power is huge, and it looks like the mad scientist that is Ben Bernanke is happy to try crazy experiment after failed crazy experiment. The negative consequences of QE will be seen sooner rather than later.

2 comments:

lala said...
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lala said...
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