February 24, 2010

~~Lending falls at an epic pace

By Timothy Stull (http://www.fresh-start.co)

The front page of the Wall Street Journal tells the whole story. Everyone is wondering why we are in a jobless recovery. The answer is simple ~ short term credit is not available. Banks and borrowers are at a serious impass….banks just aren’t lending to anyone but the “perfect borrower”. The perfect borrower days are all gone….both consumers and businesses have been whipped by the a 30 month down turn….it seems like like everyone has experienced some level of tarnished credit. Without credit, job growth is very slow ~ as businesses have to expand based off sales growth. Sales growth within all businesses relys on short term credit ~ buyers need the credit to fill cash flow gaps. Without rapid sales growth ~ there are no support jobs ~ without jobs there is no way to pay back mortgages and credit ~ which means more bank loan defaults. More defaults mean less money to lend on credit. It is an evil cycle. Banks have resorted to trying to collect on all past due debt aggressivley. Most have become unrealistic during the loan modification process ~ trying to squeeze blood from a stone. It seems like everyone is chasing the same nickel daily ~ running in a big circle. The solution to this problem is not an easy one ~ some how, some way short term needs to cut into the problem like a knife. There has been some talk about government backed short term credit for businesses and consumers. This is a huge mess that I personally will take at least 5 years to remotely clear up.

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