1) the s&p fell the least because it went up the least.

by extension, the shanghai market fell the most b/c it rose the most. there wasn’t much international flow of funds into the s&p, so there’s less hot money to leave.

2) the shadow banking system was behind the money market mess, and the fed can’t do anything about them.

also, there’s too much perceived risk.

3) commodity prices are rising b/c of a lack of capacity throughout the production structure, as well as structural imbalances caused by inflation, biofuels, and other things.

the 70’s proved stagnating economies don’t mean lower commodity prices.

4) the only people who believe this will be short-lived are mutual fund salesmen, real estate professionals, and the uber-upperclass.

the rest of us think we’re in a mess.

they have to believe things will turn around, b/c they will lose their jobs otherwise.

Thanks for the link and the info. Very enligtening and informative.

I was perusing a post at TheBigPicture.com the other day and three separate bloggers, all small business people, commented on the difficulty they were experiencing getting credit.

Though annecdotal, these set me to wondering just how small businesses would be impacted by the ongoing credit crisis. Reading Mishkin’s comments, it appears that, like all that is presently going on in the world of finance, there is a lot more unknown than is known.

I think it is worth pasting an excerpt of Mishkin’s remarks that give an idea as to the disaster that would ensue if this sector falls on hard times:

“Small businesses, generally defined as firms having fewer than 500 employees, are critical to the health of the U.S. economy. For example, small businesses employ more than half of private-sector workers, generated well over half of net new jobs annually over the past decade, and create more than half of nonfarm business gross domestic product. Moreover, larger firms often begin as smaller firms that prosper and grow. If small businesses are to continue to provide major benefits to the economy, their access to credit is clearly a high priority.”

http://www.bis.org/review/r071112e.pdf?noframes=1

Mishkin also indicated that small businesses disproportionately borrow from small banks with “assets of $250 million or less.” In the current environment in which the Fed has made it fairly clear that it will bail out only those banks which are “too big to fail,” what does this portend for small business?

In at least one instance in the past, small businesses have not fared well in the face of economic hardship:

“Business as a whole lost between five and six billion dollars in 1932. (The government figure for all the corporations in the country–451,800–was a net deficit of $5,640,000,000.) To be sure, most of the larger and better-managed* companies did much better than that. E.D. Kennedy’s figures for the 960 concerns whose earnings were tabulated by Standard Statistics–mostly big ones whose stock was active on the Stock Exchange–show that these 960 leaders had a collective profit of over a third of a billion.” (Frederick Lewis Allen, “Since Yesterday”)

*Allen goes on to explain that inherent in the rubric “better managed” was that “employees had been laid off in quantity.”