Alert the media.
William Dunkelburg, chief economist for the National Federation of Independent Business (NFIB) since 1971, tells us what we already know:
If lending is picking up, it is because customers are showing up and there is a reason to invest and hire. The reverse doesn’t work – you can’t force feed the credit to owners and have more customers suddenly show up (even interest free loans would have to be repaid!). That’s “pushing on a stringâ€. Just ask the banks.
Ever since the NFIB started asking them in ’86, business owners have been telling us that finance and interest rates are the last thing on their list of business constraints. Dead last. Always.
Grant Thornton consistently tells us the same thing in their annual survey.
Meanwhile (NYT June 2010), private equity firms “sit atop an estimated $500 billion. But the deal makers are desperate to find deals worth doing.â€
Meanwhile some more, The Economist manages to share data demonstrating exactly the same thing (this in the midst of the “crisisâ€), in an article that tries desperately to claim exactly the opposite.
It’s enough to make a fellow wonder: how important, really, is the business lubrication provided by Wall Street’s gusher of credit, intermediation, and “liquidityâ€? Is there far (far!) more than we need, or is good for us? Is the shop-room floor looking awfully slick?
When we hear concerns that businesses won’t be able to *make payroll* because CIT is on the rocks, that shifting their cash flow by two or three months is critical to the Well-Being of the American Economy, does anybody else start thinking “good candidate for creative destruction…â€? (Apple seems to be doing…okay, given that they have tens of billions in the bank and no debt. Think they’ll make payroll?)
When CEOs, since the 80s, have gone from being entrepreneurs to arbitragers, practitioners of financial prestidigitation, does anybody else see one likely explanation for the secular decline in growth since then?
And when that flow of credit has gone almost completely not to the real economy that produces goods and services with human utility, but rather to the the financial economy (PDF), does anyone else start to wonder whether this decades-long gusher of credit issued to the financial industry, by the financial industry, is perhaps a detriment, rather than a benefit, to our national well-being?
One word to rule them all: demand.
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One response to “No Kidding: Loan Demand, Not Credit, Is the Problem”
[…] (especially financial) cash balances are at an all-time high. What are supply-siders smoking? See here and the links therein for much more evidence of the […]