Wednesday, July 14, 2010

The Small-Business Dilemma

Earlier this week, Fed chair Ben Bernanke claimed that he was concerned about the ability of small-business owners to have sufficient access to credit. "Making credit accessible to sound small businesses is crucial to our economic recovery, and so should be front and center among our current policy challenges," Bernanke said on Monday.

As if in response, the National Federation of Independent Business released its monthly survey of small businesses on Monday, and showed that confidence among small-business owners is distressingly low. The biggest drop in the index of indicators was that a majority of small-business owners now expect business conditions to be even worse in six months than they are now. According to the NFIB's chief economist: “What businesses need are customers, giving them a reason to hire and make capital expenditures and borrow to support those activities.”

Note that his opinion is backwards from Bernanke's. Bernanke is focused on keeping credit flowing freely to small businesses; the small-business owners say that until they have more customers, there's no need for more credit. To have these people working at cross-purposes to one another is not a good sign for our economy.

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