Bank Lending Plummets: Further Evidence Of Economic Downturn Ahead!

In order for an economy to grow, access to the capital markets is essential.  In the mid-2000's, banks were tripping all over themselves to lend money to anyone for any half-cocked reason.  The penduluum has swung to the other side.  Bank lending standards have become so tight that they are certain to choke off hope of an economic recovery.

David Rosenberg from Gluskin Sheff said lending has fallen by over $100 billion since January, plummeting at an annual rate of 16%!  “Since the credit crisis began, $740 billion of bank credit has evaporated.  This is a record 10% decline,”  (http://canadafreepress.com/index.php/article/20164).

Mr. Rosenberg said it is tempting fate for the Fed to turn off the monetary spigot in such circumstances.  “The shrinking in banking sector balance sheets renders any talk of an exit strategy premature.” 

So far, this year alone, U.S. bank-lending has fallen by over $100 billion – from the extremely depressed levels of 2008.  Thus, not only is U.S. bank-lending falling at the fastest rate in history, but it is doing so from a level which was already far lower than bank-lending before Wall Street destroyed the U.S. economy.  So what else is new?

The problem is not soley the result of bank stinginess.  As the result of the banks' profligacy in the mid-2000s, new regulations have drastically tightened lending standards, thus precluding loans that might have been made otherwise.  In addition, credit demand has plummeted.

An important question is "to what extent is the decline due to tightened lending standards rather than falling demand?"   Demand shortfalls may be a key component at this point; while the National Federal of Independent Business continues to warn of tight credit conditions.  Its latest discussion of small business conditions indicated that the biggest problem facing small employers is a "shortage of customers".

Without a functional and vibrant credit market, no economic recovery is possible.  In fact, the latest trends point to an imminent second dip in the "Double-Dip Hyper-Inflationary Depression".

Unfortunately, the unavailabity of credit for small business is the most significant aspect.  Small business, especially those companies under 100 employees, have proven to be the engine of growth.  By cutting off their lifeblood, ongoing high unemployment is assured.  And, as a result, we can expect absolutely NO economic recovery.

Disagree?  Agree?  TAKE ME ON!

Marko's Take

Please visit our new video blog site:  http://youtube.com/markostaketv

Rethinking The American Dream

For as long as I can remember, the United States has been known as the "land of opportunity".   The "American Dream" was a popularized notion that even the poorest of immigrants and citizens could realize untold success in the United States, by virtue of the opportunities afforded by our free and entrepreneurial spirit.

Unfortunately, that's all changed.  Not only have some of the liberties we once enjoyed been taken from us,  but America has now become a complete horror show.  Just take a look around and you'll see all the "For Lease" or "Going Out Of Business" signs.  In so doing, you'll become aware of the trememdous pressure this formerly accommodating economy has been putting people through.

Small businesses are failing in droves.  The very driver of our  previous economic miracle had been via small business, be it a garage, which would ultimately create many millionaires, a la Microsoft, or some housewife's notion that garage sales could be taken national, like EBay!

Now, the "American Dream" has been reduced to mere survival!  Sadly, while innovation continues, the means of financing and promoting that innovation has been thwarted by the only beneficiaries of the current admistration's efforts.  OUR  BANKS!!!!  Statistics are unequivocal in demonstrating an utter reluctance to lend plus a regulatory effort to furthur impose roadblocks to lending.

This makes me want to SCREAM!

Economists, as a whole, are notorious for their bumblehood, but they DO agree that small business and innovation are the key drivers of economic growth.

Sadly, the adminstration has done precious little to help the plight of small business while rallying around the "boy's club", which includes some of Wall St., the Federal Reserve and the administration itself.

Clearly, the administration knows better.  I'm just a regular guy in Los Angeles.  On the other hand, the boy's club has all the true information at ITS fingertips.

All I can suggest at this point is the ballot box.  The election of 2010 can send the greatest possible message to our "benefactors".   Please vote!  Please vote!  Our future DEPENDS on it!

I apologize if my ramblings have come across as hyperbolic.  My intention was to demonstrate the passion that this issue raises in me.  If nothing else, tell your friends, leave a comment and let the power of social networking do it's miracle.

Marko's Take