Maybe.
Do you remember back in 2008 when everyone was talking about giving the banks money to lend to people and businesses? Well that never happened because it turned into TARP and Congress forgot to tell the banks what to use the money for. But, if they had, we might have had a different recession altogether.
My late-evening thinking is that if small business had access to loans (their primary source of funds to grow), then they would be in a position to hire.
Which brings me to my chart above. Don’t worry too much about the blue vs red line, I just wanted both of these things on one picture.
The blue line is basically the % of banks that are increasing their willingness to make loans like for cars and homes. Only recently did that % grow positive, meaning only recently did ANY banks make the transition from increasing willingness to lend from decreasing. This will help spur demand because consumers will have access to money from the banks again. The personal finance guy in me hopes it’s always for fixed rate responsible loans, but the economist in me is less concerned. The increased willingness is correlated to increases in spending, which is what we need to get out of the crappy economy.
Now, look at the red line. This is the % of banks reporting stronger demand from businesses to borrow money. It’s STILL negative. While the line presented is for small business, the one for mid and large is basically the same. In other words, businesses aren’t interested in borrowing. If they aren’t interested in borrowing, they aren’t interested in hiring.
What will get them interested? Increased spending. This week I’ve said that I’m more worried about the economy and questioned what it is in that chicken and egg argument that will get the economy moving again. Looks like it was the credit markets all along, and maybe, just maybe, this heatwave is unfreezing them. So maybe, those jobs will trickle in a little faster soon.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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