Dr. Bill Dunkelberg discussed the current state of the economy, near-term prospects and the likely impact of current monetary and fiscal policies on the economy. How will the trillion dollars of new spending be financed? Is “government job creation” an oxymoron? Will foreigners continue to lend us money? What is the burden of the debt? How does this recession compare to past recessions? Where will the economy be a year from now?
Notes on the Economy Excerpt
“An uptick in…lending could help businesses expand and reduce employment,” says the report, reflecting the view that it is credit supply that is the problem. The banks mentioned in the article are all of the “biggies” who had, and still have, major loan-loss problems and pulled away from small business lending. Missing in the report are references to the thousands of community banks who did not get caught up in the “bubble” and are the mainstay of lending to Main Street firms. Yes, credit is harder to get now at these banks than it was during the bubble, and it should be. Underwriting standards were seriously compromised, and bubble prices overstated the true value of collateral.
That the real problem is loan demand was confirmed while speaking to bank organizations in half a dozen states over the past year. Loans have to be repaid, meaning that the money must be used to finance the acquisition of employees or equipment that will “pay back” the loan. This is common sense. But a record numbers of owners – as high as twenty-eight percent – have reported that “weak sales” is their top business problem, while only four…