Indicators that we see happening today are lagging actual events. We are just now seeing results of interest hikes that happened last year so, if we extrapolate what is happening now out 6-12 months it's pretty easy to see where we are headed. My father used to tell me: "If you don't watch where you're going you'll end up right where you're headed".
"what we found most notable in the context of the credit crunch is how difficult it was for small US businesses to obtain a loan in March after multiple bank failures led to a further tightening of credit conditions. According to the NFIB, a net 9% of owners who borrowed frequently said financing was harder to get compared to three months earlier, the most since December 2012. Worse, the 4 point monthly drop in the series was the biggest collapse in credit availability in more than 20 years."
"The report was rather gloomy and downbeat as has been the case for much of Biden's tenure, marking the 15th consecutive month below the 49-year average of 98 with 24% of owners reporting inflation as their single most important business problem, and a net negative 47% of small business owners expecting better business conditions over the next six months (so not really), which in turn is hammering hiring plans."
“Small business owners are cynical about future economic conditions,” said NFIB Chief Economist Bill Dunkelberg. “Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.”
Another trend I'm observing from my position as a private commercial lender is there are much higher quality credit profiles requesting funding than before. Although that sounds like a good thing (it is) it's also a sign that banks are declining more merchants that would otherwise get financing from them. That doesn't bode well for the market place in general because when credit contracts across the board, bad things happen in the economy. Credit contraction is measured by the M2 which has only gone negative 5 times in our nations history and each time that has happened, financial recession or depression has followed:
5th time since 1868…last time was 1930. All the prior 4 times were associated with a large inflationary speculative period preceding this trigger followed by deflationary financial panic. Maybe this time is different?
Why so gloomy? I'm just reporting things as I see them. Like I said: I sure wish I was wrong about all this. I would much prefer to deal with the humiliation of having made wrong assertions and I'd even withstand being mocked for them rather than turn out to be correct and deal with what's coming.
For now, I'm working hard to help as many business owners as I possibly can to access affordable capital. I hear about what they are dealing with and most of what I hear confirms the things I'm seeing in the back offices and board rooms of the lending community.
We shouldn't live in fear, many of these changes will offer massive opportunities to many, many business owners. I hope and pray that you, dear reader are among them!
