I'm just telling it like I see it friends, I'm no "doomer" - I truly believe in the resilience of the American business owners and I'm certain we'll all will find ways to benefit from the new conditions. First we have to understand what those conditions are, what caused them and how to best prepare to deal with their consequences.
It's safe to assume that information coming from sources such as government agencies and media outlets is consistently unreliable.
"If we calculate CPI according to the same methods used during the stagflationary crisis of the 1980s, real inflation has been in the double digits for the past couple years. This constitutes galloping inflation, a very dangerous condition that can lead to a depression event."
The banking crisis we're in right now is a direct result of the interest rate hikes from the Federal Reserve. They are ostensibly hiking rates to "fight inflation" which they caused by printing Trillions of new dollars using nothing but mouse-clicks and then flooding the economy with "stimulus" which in turn "inflated" demand:
"To give you a sense of how bad the situation is, we can take a look at the Fed’s M2 money supply (they stopped reporting the more complete M3 money supply right before the crash of 2008). According to the M2, the amount of dollars in circulation jumped around 40% in the span of only two years. That is an epic amount of money creation and I would argue that the economy still hasn’t processed all of it yet."
The upshot of this is that we're in for more banking turmoil; much more! That will tighten lending conditions even further eliminating a basic funding source for business working capital. That will feed a doom-loop of scared bankers who correctly perceive higher risks so the cost of capital will also rise for those who can secure approvals.
"The banking industry got another reminder Tuesday that the problems that roiled the financial world in the spring are not yet in the past. Regional bank stocks fell Tuesday after Moody’s Investors Service downgraded 10 mid-sized institutions by a single notch, including M&T Bank (MTB), Webster Financial (WBS), BOK Financial (BOKF), Old National Bancorp (ONB), and Fulton Financial Corp (FULT)."
"Bank Stocks Slide After Moody’s Downgrade “The ratings firm also pointed to the prospect that a recession in early 2024 could erode demand for loans and lead to loan defaults. Banks could be hit by problems in commercial real estate, the firm said, including higher interest rates, vacant offices due to the shift toward remote work, and reduced availability of credit.”
The main effect of all the money-printing that has occurred is the devaluing of our money's purchasing power. That's why things are more expensive. Not because they have more value but, because your dollars have LESS value.
Capital costs more and buys less - business owners need to protect their margins so prices have to rise which dampens demand and so on. Shrinking demand and lower margins need to be factored into planning otherwise there will be surprises.
Capital is still available at the same cost even from years ago. Even though conditions are tighter than before I'm approving requests and sending wires out every day of the week.