Small Business and Recessions

Jeff Cornwall brought Us a very good article, but it is consistent with every Recession, all because Small Business deals with the same defects continually in their operation. Be sure to read the Wall Street Journal article it links with, as it is equally accurate. Students should have an outline of Why bankers fear extension of Credit to Small Business within recessions. The most primary problem, of course, is the sharp curtailment of Customers for Small Business under recessionary conditions. Bankers have to estimate that Small Business will do no more than pay the interest on the debt, if that, for the first 3 years of the loan. The second element consists of the fact that most Small Business remain Speciality markets, whose Owners have relatively little experience in alternate Production. Their Product lines are limited in both scope and number, and have little chance of real expansion through lack of experienced labor and relatively set rates of Production. There are real detractions from any process of conglomeration with others, due to personal animosities and legal restrictions which must be met by law upon enlargement of the firm. The most probable telling point, though, remains the realistic factor than to increase Production within these small firms, there will have to be an increased capitalization of the enterprise, so that the lenders will have to assume greater Risk.

Calculated Risk gives a good Post, if Students want to study hard. I would advise some Thought be expended on this thing. The basic idea which should be taken from the material states that Employment is currently very stable, and already adjusted for the current level of Production. Fear of Job loss is growing in the labor market, as evidenced by the decline of voluntary Quits in comparison to Fires. The drop of new Hires to the level of Fires means that Business has already dropped to basic employment levels, and such Business decision does not bode well for future employment. It is actually Time for a new Product creation of the magnitude of Windows Software, to turn around the disparity between labor needs and labor supply. An actual new Turn in Production must be made, and I doubt that such a fundamental shift can be found in short order.

I will finish with presentation of this article. What can I say about this thing, when I know so little about the Japanese economy. I should at least state that Japan has an Export-driven economy, where is had to hold down Wages and reduce Transportation Costs; it did not, and therefore, less-organized but more competitive economies successfully vied for Product provision. Japanese monetary policy became side-lined, as is the current American monetary policy, because of Private Sector decisions to avoid bank loans in favor of new financial instruments and Savings; monetary policy became only a nuisance which could be avoided. The Japanese Government finds ever decreasing Voice before both it’s Corporations, and it’s Citizens. The real venue left is for sharp taxation to drain both these elements of their Cash reserves. It is as unlikely as in the United States, with no major political figure to propel Change. The real problem is the same as the American: You cannot get people to act in a responsible manner, until they actually feel like they are in a Recession; something the Welfare conditions of both Countries preclude. lgl