Ben's Talk3G Blog

Today brings news that banks are lending less to business customers yet again. What a surprise.

The actual surprise is how everyone finds this so shocking. If we're going to have a stable recovery then it can't be one built on the sand foundations of credit as it was before. Businesses need to be operating with positive cash flow and without mounting debt just to finance their day to day operations.

Yes, credit is important to finance certain projects, absolutely. But I sincerely doubt that the banks are rejecting business applicants with serious proposals. I doubt that very much indeed!

Servicing debt is a major ball and chain around the ankles of businesses, with interest sucking out valuable cash and putting it instead in the hands of bankers. It's about time we enjoyed slower, more sustainable growth and stopped yearning after credit which is all too often only a temporary solution for bigger problems.

The main problem of businesses not borrowing is the contraction of the money supply. Money is created through loans, so less borrowing literally means less money. But we're at above-target inflation at the moment, so there's clearly enough liquidity sloshing around to keep everybody happy.

What a ridiculous notion a debt based economy is. Sigh.