Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

Double Dip Fears As Bank Loans Dry Up

Recommended Posts

http://www.guardian.co.uk/business/2010/jul/20/recession-bank-lending-small-businesses

George Osborne and Vince Cable will spell out next week the dangers of a double-dip recession caused by a drying up of bank lending to Britain's hard-pressed small and medium-sized businesses.

A green paper, to be rushed out by the chancellor and business secretary before next week's parliamentary recess, will acknowledge the scale of the lending rationing crisis, which could "abort" the fragile recovery.

As the Bank of England (BoE) published data showing yet another month when more loans had been repaid than had been granted, Cable admitted the level of anxiety in the government about the flow of funds to smaller companies. He said: "The green paper will acknowledge the scale of the problem and how the recovery could be aborted if we don't get on top of this.

"There is a fundamental policy conflict between efforts to make the banks safer and our wish to get them lending more freely to promote growth," Cable said.

He has been presented with research from the banks – which have given the work by PricewaterhouseCoopers the name "Project Oak" – showing that tougher capital rules and the end of emergency liquidity injections from the BoE could drain the banking system by £1 trillion in the coming years.

Cable believes there is a "very frustrating standoff" between the banks and small businesses: banks argue there is no demand, while businesses say they are not applying for loans because they expect to be rejected or the cost is too high.

"We have to acknowledge there is an issue," said Cable. Even so, he does not appear to be ready to alter the current lending targets for Royal Bank of Scotland and Lloyds Banking Group, which run until next March.

Since the 2008 banking crisis, lending figures from the banks compiled by the BoE have been positive in only three months. The Liberal Democrats calculated that £46bn of loans had been withdrawn in the past year alone.

Howard Archer, economist at IHS Global Insight, agreed with Cable that the BoE data showed "several worrying traits". Archer said: "The survey very much maintains concern that tight credit conditions could hold back the recovery. This is even allowing for the fact that ongoing muted bank lending to companies is being influenced significantly by low demand for credit in addition to restricted supply.

"Lack of access to credit for smaller businesses is still a serious problem despite some reports that it has risen slightly in recent months," said Archer.

Debt is wealth.

It's the loanless recovery.

Share this post


Link to post
Share on other sites

There is only one way to help small business. Get large amounts of cash into the hands of the mass of consumers. They don't need loans to expand when they are already downsizing because of falling demand.

Share this post


Link to post
Share on other sites

There is only one way to help small business. Get large amounts of cash into the hands of the mass of consumers. They don't need loans to expand when they are already downsizing because of falling demand.

Nope isnt that easy. The purpose of money in an economy is to stimulate productivity and you achieve that only by giving people money as a reward for being productive. Sure if you give people money for no effort then a demand spike is created but the increased output of said small businesses is offset by the reduced output (due to reduced incentive) of the people who get given the free money.

Edited by goldbug9999

Share this post


Link to post
Share on other sites

Nope isnt that easy. The purpose of money in an economy is to stimulate productivity and you achieve that only by giving people money as a reward for being productive. Sure if you give people money for no effort then a demand spike is created but the increased output of said small businesses is offset by the reduced output (due to reduced incentive) of the people who get given the free money.

When you are issuing debt as money you are speculating that you stimulate productivity and you are anticipating that they will be productive in a useful way. You may create demand spikes in the wrong area. Trouble is you then have to issue even more debt money to cover the losses which is likely to stimulate even more demand spikes.

At some point the system implodes.

Share this post


Link to post
Share on other sites

http://www.guardian.co.uk/business/2010/jul/20/recession-bank-lending-small-businesses

Howard Archer, economist at IHS Global Insight, agreed with Cable that the BoE data showed "several worrying traits". Archer said: "The survey very much maintains concern that tight credit conditions could hold back the recovery. This is even allowing for the fact that ongoing muted bank lending to companies is being influenced significantly by low demand for credit in addition to restricted supply.

hold me back hold me back

Share this post


Link to post
Share on other sites

Just what a failing business needs ... a huge loan!!

What SME business wants a loan when their confidence in this economy is zilch? I believe the banks on this point; they are not being asked for loans as much as usual. Grumbling about refusals to give loans, held up as proof 'the banks are not lending'' is nonsense. They won't lend if there is no prospect the business cannot repay the loan will they?! And what does all this mean? We're in a recession, that has been pumped up by Labour borrowing and is set to get worse. We will have borrowed and accumulated more national debt for no good reason - the recession/depression nees to run its course. A painkiller printing session does not cure the disease of credit induced deflation. It just delays and worsens the symptoms.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.