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Posted 10/30/09 12:51 PM jbo5112 Kansas City, MO | We've borrowed from future car sales by bribing people to buy now. We've borrowed from future housing sales by bribing people to buy now. Credit isn't being handed out as quickly anymore, partly due to less people with jobs and less people qualifying. People are leery about losing their jobs, so they're not as apt to take on new debt, buying things with unguaranteed future income.
Companies are sitting on financed inventory needing to sell, just so they can keep their inventory. If Christmas sales aren't good, they can't make payments on what is left at their store, and are forced to default and go bankrupt. If that happens, all their employees will lose their jobs, and unemployment will skyrocket. They are calling this a recovery? The alternative probably involves just enough spending to keep the companies about where they are, with the cost of a lot of credit card debt. It doesn't take a genius to figure out who stands to get the biggest profit. |
Posted 11/01/09 11:32 AM sweetliberty San Rafael, CA | I really don't like how the first paragraph is worded.
"Defaults by small and medium-sized U.S. businesses on the loans, leases and lines of credit they use to finance capital equipment investment rose in September as lenders remained reluctant to extend fresh financing, PayNet Inc reported on Friday." That makes it sound like the defaults are the fault of the LENDERS, not the responsibility of the borrowers. As I heard on the radio the other day from a small business owner, "We don't need more loans. We need more customers." |
| Posted 11/01/09 11:32 AM sweetliberty San Rafael, CA | I mean... is it any wonder lenders are reluctant to lend, when defaults are on the rise?
Let the free market work! |
| Posted 11/01/09 8:15 PM redshirt Philadelphia, PA | Well, actually, one reason loans are scarce is the FED is competing with the market. There is no free market. By setting the interest rate so low, banks can't expect to make a profit on loans -- all loans would have to be near zero risk. Meanwhile, the FED is offering the banks interest on their excess reserves, directly competing with the businesses that need the loans. They are taking control of everything.
The only hope I see is if they ultimately insist the banks maintain much higher reserves so that the money doesn't eventually explode out onto the market. (Note that the dollar has nevertheless sunk very low, threatening to force the FEDs hand -- setting higher interest rates.) http://www.getmoneyenergy.com/2009/08/new-fed-trick-stemming-inflatio n-fed-pays-banks-interest-excess-reserves/ |
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