Since the credit crunch began (all the way back in 2007?!), it’s been a she-said, he-said war of words between entrepreneurs and banks.
Entrepreneurs say they can’t get funding. Banks say that they are lending, but there’s nobody credit worthy enough to lend to.
Today, the Wall Street Journal’s Small Business Section reports that this lack of credit flow is still ongoing:
The economy is on the mend. The government has launched a boatload of programs to get small businesses financing. President Barack Obama has urged banks to give the companies a “third and fourth look” before rejecting them for loans.
Yet entrepreneurs are still struggling to land credit. Only half of small businesses that tried to borrow last year got all or most of what they needed, according to a survey by the National Federation of Independent Business. In the mid-2000s, 90% of businesses said they got the loans they needed.
What’s going on here? Why is the credit crunch alive and well when it comes to small businesses?
The article actually heads downhill from here – citing potential government fixes to the lending problem.
Look – the government is the problem here – not the solution. Massive fiscal deficits at the local, state, and federal levels have resulted in record issuances of public debt. Because public debt is theoretically “safer” than private sector paper, free enterprises get crowded out of the equation.
It’s simple supply and demand. There’s only so much demand for bonds. If the public sector is issuing massive amounts of it, that means it’s going to be more and more of a challenge for the private sector to raise money via debt. It’s that simple.
You want a “government fix”? Stop spending and borrowing so much damn money.
Our Partners
We publish a free daily newsletter, The Contrary Investing Report, which highlights trading and investing stories that are key to your financial success and survival. Please subscribe here.
Post Footer automatically generated by Add Post Footer Plugin for wordpress.
{ 4 comments… read them below or add one }
Brett
Well said. I find myself thinking (yelling?) the same thing every time I read this or see it on TV.
The best possible economic stimulus would be to dramatically shrink the size of government. How is this not obvious?
Thanks for your work, I am enjoying the blog.
Brett,
You mentioned in a previous post going long SDS. Question for you, what about the folks that say don’t long leveraged and inverse leveraged ETF’s due to the daily reset or daily balancing?
Enjoy your blog. Thanks.
Hey Brian, thanks for the question.
I think SDS and other leveraged ETF’s are fine as short term holds. I guess in my case it’s more of an intermediate term play.
Over the long haul, I agree with their point – you can get grinded down by the reset. But on shorter term downtrends, you can also make a boatload. So it depends on what you think the market will do as to how you want to play it, I think.
As you know, I’m battening down the hatches for another wicked leg down, so in my opinion, SDS should be a good play on that.
Thanks Luke – I hear ya – it’s blindingly obvious to guys like you and me, and our other readers – folks who have real jobs, understand how markets work.
Frustratingly the guys in Washington, Sacramento, etc, largely never had a real job in their entire lives – if you ever talk to a lifetime government wonk, it’s like they just landed in from Mars, they have no clue how the broader world actually operates.
The only solution I see is one that the market will impose – it’s going to try to take down the entire system. Long term this will be a good and healthy thing – will clear out a lot of crap and imbalances – but until then it will probably get very ugly.
{ 2 trackbacks }