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The Biggest Problem For Europe's Small Businesses: "Finding Customers"
Three weeks ago, some were surprised to learn that after a blockbuster September, new RMB loans in China fell off a cliff in October, coming in at just CNY514 billion against consensus of CNY800 billion.
Both corporate and household lending fell more than 60% from the previous month. In short: the credit impulse just shriveled up and died.
To some observers, this was a shock. After all, between multiple rate cuts and round after round of liquidity ops, you’d certainly think that banks would have excess cash to lend. Of course the problem isn’t liquidity. The problem is the economy and, in China, a worsening NPL problem.
Leaving aside Beijing’s souring loan crisis for now, the overarching point is that while central banks can keep the liquidity flowing, what they can’t do - despite what Draghi, Kuroda, and Yellen will tell you - is boost aggregate demand. This has become abundantly clear in the post-crisis world as trillions in global QE have failed to engineer a robust recovery in either global demand or trade.
When economic activity is anemic, you can expect the credit impulse to dry up. Businesses don’t want to invest when the economy is in the doldrums and when everyone has an overcapacity problem. As one loan officer at a Big Four bank told MNI over the summer, "our bank's loans in July in the Beijing area were even weaker than in June. We can't find the demand."
Well, as you’re no doubt aware, the ECB has thus far failed to give Europe’s economy the defibrillator shock everyone thought would come from the €1.1 trillion PSPP. Given that, and given everything said above, we weren’t surprised when the latest Survey on The Access to Finance of Enterprises in the eruo area showed that for EMU SMEs, the problem is not access to credit, it’s “finding customers.”
“Finding customers” remained the dominant concern for euro area SMEs in this survey period, with 25% of euro area SMEs mentioning this as their main problem, slightly down from 26% in the previous survey round,” the ECB said, adding that “access to finance” was considered the least important concern (unchanged at 11%).”
Why is this a problem (beyond the obvious)? Because as Reuters notes, “small-to-medium enterprises form the backbone of the euro zone's economy.”
As the ECB goes on to point out, “the external financing gap of euro area SMEs, which measures, at firm level, the perceived difference between the need for external funds and the availability of funds, has become negative at the euro area level for the first time since 2009.”
Or, graphically:
So once again we see that you can pump money into the system until the cows come home, but what you can't do is centrally plan an economic recovery no matter how many trillions in assets you monetize.
Put differently, you cannot print demand and you cannot print trade, and as we explained back in April, "those who have access to easy money can produce, dig, drill, and mine all they want but unfortunately, they will not witness a comparable increase in demand from those to whom the direct benefits of ultra accommodative policies do not immediately accrue."
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I hear the Greeks all have Mattresses full of money and Jewels...ask them.
LMAO!
When Brussels taxes at absurd rates to "take care" of its citizens, there isn't much left over for shopping.
" We Vat-ted some folks. "
Standard VAT runs about 20%
https://en.wikipedia.org/wiki/Tax_rates_of_Europe
If a non-EU peeple visits the EU, apply for a refund BUT if you depart thru paris it will most likely be lost or stolen by gubmint officials so don't expect it in the mail.
Sorry.
They're all either hiding from Muslim rape squads, or they've been found.
The answer to all their problems is EBT cards and Obamaphones along with a big dose of Kim Kardashian, faster and more effective than a lobotomy......
Those cool beautiful Europeans you see on the net from time to time are jack broke, penniless, virtually insolvent, and nothing "Santa Draghi" can do can reverse their inability to buy.
the Greek government has mattresses full of money and jewels. To prove it they are conducting their first nationwide inventory of their asset's. the Greek citizens have been kindly holding it for them.
Need more customers? Import Syrians?
Not just Syrians, ALL Muslim lowlife.
Just the single, fit, males of military age......
1. Collect underpants; 2. ?????; 3. Profit.
So Euros don't have any money to buy stuff with? Amazing. Stupifying! With negative interest rates, they should be rolling cash!
Thats right, the new refugees will be the customers.
I'm sure when the price of oil returns to $110.00 a barrel, everything will be fine. After all, we've been told that rising prices is GOOD for the economy! So these businesses, that have been having trouble finding customers, need to raise prices! There! All fixed!
No liquidity = no customers. This will be making an appearance here in USIS...ummmm, USIL.....errrr... USA corp soon.
Amazon does not have a customer problem?
Does Capitalism Work?
The people who argue that “capitalism works” are the same people who argue that we should have less government interference in the market. Now, I am all for less government; however, the plain fact of the matter is that capitalism cannot function without this interference; capitalism relies on an expanded state to balance aggregate supply and demand. Consider this fact: in the period from 1853 to 1953, the economy was in recession or depression fully 40% of the time. Since 1953, that is, since the economy became fully Keynesian, the economy has been in recession only 15% of the time.[3] Moreover, the pre-war recessions were, on average, twice as deep and twice as long as the post-war ones.
There has been an on-going attempt for the last 30 years to return the economy to its pre-Keynesian status. Since the rise of Margaret Thatcher in 1979 and Ronald Reagan in 1980, the political rhetoric has been about “free markets,” “lower taxes,” “less government interference,” etc. Both Reagan and Thatcher took Fredrick von Hayek as their economic mentor. But the more “Hayekian” the economic rhetoric became, the more Keynesian the economy has actually become; the unintended consequence of Hayek’s policies have been the opposite of what Hayek wanted: larger governments, greater debts, more centralized economic power, and so forth. Keynes’s policies are certainly, as Hayek claimed, a “road to serfdom,” but Hayek’s policies have turned out to be a super-highway to that same dismal destination. Nor is this true just for the United States and Britain. Since the Reagan administration, the World Bank has forced Hayek’s economic policies on all the developing economies, and the results have been uniformly dismal. Indeed, the theories of Hayek have been tested just as much as have the theories of Karl Marx, and with about the same results: more government power, less economic freedom; under neither did the state whither away, but became an all-encompassing behemoth.
Níl é go dona...
Capitalism didn't cause this, CRONY Capitalism did. When people realized they could buy their way to success, we left the road of Capitalism and jumped onto the Corporatism highway.
A Capitalist economy has ebb and flow as supply and demand change. Recessions in and of themselves are not bad, they are a time for creative destruction. It's only when we operate under a fiat, debt-based system that Recessions are a bad thing.
Power hungry corporatist bureaucrat banksters are what are destroying us, not Capitalism.
Capitalism was always like this, it lives off the destruction of localism.
You sound like yet another deluded American puritan.
A true believer in bullshit.
"capitalism relies on an expanded state to balance aggregate supply and demand"
No, price does that.
Fair point.
But Mobilization is used to prevent distribution and aid concentration as happened in 1914.
The banking system cannot give out the economic surplus (free Stuff) for free so it's solution is generally war.
Fair point.
It is difficult to know whether or not free market capitalism works when it has not been tried. You are obviously NOT for less government. You are relying on bogus assumptions, faulty comparisons and lack of knowledge in economic theory.
Your use of "Aggregates" gives away the fact that you subscribe to Keynesian economic "Modern" theory which is nothing more than a rehashing of 18th century mercantilism and a good dose of Marxism. Completely debunked in the 19th century (mercantilism), Keynes revived these worn out falsehoods and repackaged them in 1936, only to be debunked again. Keynes drew from mercantilism and Marxism, and for all intents and purposes the US and Europe are still relying on the economic quackery that grew from both "philosophies".
"capitalism relies on an expanded state to balance aggregate supply and demand."
No it does not. Free market capitalism relies on prices to determine equilibrium between supply and demand. A refusal to lower prices, or simply fixing prices (most often wages), leads to unemployment and then leads to government borrowing to "fix" the problem of too little "aggregate demand". As long as you have government subscribing to Keynesian theory , both fiscally and monetary, it is IMPOSSIBLE to have free markets. You will also have mass unemployment without borrowing from future generations.
Your comparisons between 1853 and 1953 and 1953 to present make no sense whatsoever. The Fed was created in 1913, ending any resemblance to free markets in money and banking. So, if you want to draw any lines, it should be there. The federal government also implemented Marxist redistribution policies beginning in the early 20th century and came in to full swing in 1933 with the New Deal. Johnson's Great Society was implemented in the 1960's. Nixon declared himself a Keynesian, Carter could hardly be thought of as a free-market proponent, and while Thatcher and Reagan made efforts to curtail government, one only need to look at the growth of government from the 1980's to the 1990's to know government did not shrink. Efforts to deregulate in the 1990's were largely thwarted by politicians and bureaucrats caving to special interest and campaign contributors. Bash II was hardly a free-market supporter and the one chance to completely rid ourselves of a centrally planned command economy during the financial crises, instead was used to entrench government even further.
The policies advocated by Hayek would indeed work, they just simply have not been tried. Why? Because the entrenched benefactors of Socialism would lose the most. We are suffering not from capitalism, but from a tyranny of the status quo. Overall, you are subscribing to the Dr. Paul Craig Roberts theory that crony capitalism = free market capitalism, which is completely false.
Milton Churchill
you need to quit writing (don't even try thinking) you cannot spare the few brain cells you have left. You are lucky you have enough cells left to power your autonomic system.
FUCK YOU, DRAGHI!!!! BASTARD!!!!!!!!!!!!!!!!
http://www.theimaginativeconservative.org/2010/09/economics-of-distribut...
My grandpappy used to say "the rich people are just like hogs at the trough, they'll eat it all if you let them, 'cause they don't know when to stop, politicians too."
Best piece of advice I ever got.
There are huge numbers of SME's which can only exist and survive in an economy which is booming from rising consumer debt levels. Once that avenue of consumer spending is reduced or cut-off by way of debt having reached unsustainable levels, the SMEs quickly go down the pan. They are selling stuff that people can't afford any longer or don't want.
I'm not saying this is necessarily the cause of SMEs having a problem finding customers, but I'd bet it's a very important factor.
There's been a lot of work done on this over the years. Charts that show the almost recession-proof market sectors and those I describe above.
THE FUNCTION OF ECONOMIC ACTIVITY IS NOT TO INCREASE TRADE
The function of. Production is consumption
Finance capital likes to increase trade without consumption as it aids financial concentration.
But the fact is I cannot afford a pint brewed down the road but can afford a flight to Spain.
Something is very very wrong with the production consumption system
The system is grossly distorted by extreme usury.
The purpose of all economic activity in its pure form is to end up with more than you started with.
And you used the word distortion. That's the crux of the whole thing. When people start to muddle the market with subsidies, price controls, regulatory burdens, etc., you end up with a 'market' that resembles our current stock market situation....not relating to reality in any way.
No - hoarding should not be the purpose in life.
It's a sort of denial of death.
Hoarding is necessary (autumn Harvesting) but if it is excessive leads to waste and a wasted life.
We would all like to embrace the ghost of Christmas present but finance capital does everything in its power to prevent this.
Forcing us to save in a forever winter economy.
Heres the problem with the global economy:
A very small amount of people have 95% of the wealth.
Much or most of this wealth was not worked hard for, or based on labor or innovation.
But suggesting that billionaires be taxed more results in cries of 'communist'
So, what can be done?
What can economics phds do in our fucking fiat/frac reserve debt-money system to "help the economy?"
Exactly.
No - seriously... When have economists ever created jobs or facilitated new technology.
Theres shitloads of money and billionaires have most of it. They use that money to buy our governments and foment wars but goddamn it it would be un-American to tax thrm at 50%.
So what the fuck - the rich will keep getting richer because they have more capital in the first place and the fed will keep giving large banks cheap money ehile we pay 3 times face value on a mortgage.
But thats better than making Bill Gates and Fuckerburg hand over some of the fucking BILLIONS THEY HAVE, right, leaving them with BILLIONS - that would be 'unfair' but me getting taxed out the ass at almost the same jrate all in for no free health care or paid vacation - that majes sense, right?
You can not fix a system when you dont have the capacity to actually create new jobs, goods, and/or services.
Government cant create jobs.
NEITHER CAN ECONOMIC POLICY.
More like European Business owners are operating CASH only and reporting none of the sales so that they can maintain some kind of sensible living standard and feed their families.
the real issue here is that we, the eurozone's SMEs owners are pestering TPTB to level a bit the field for us, since megacorps are practically skating on liquidity
but it's not demand that is really "ailing" us
it's the insane price wars that megacorps can afford to do, lack of "young blood" in our ranks, and yes, the cavalier attitude that banks can have with us
those bankers have the impression we can grow like megacorps. sorry, we grow... organically
banker, take your "need growth" and shove it where the sun does not shine
our motto, our answer to Minister Colbert's question is still the same: "Laissez faire". and to the banker: grow up, and smell the coffee
How can you not find young blood?
Data shows the youth of Europe is educated to a largest degree ever and unemployed to the largest degree ever.
Does all this mean that even if they keep giving money away to big banks that the little people will continue to do the same driving the depression deeper until the mass consciousness of humanity tries to get rid of its collective psychopathy by.....killing each other with fancy weapons so the rich can get richer and the poor get darwin awarded?
Usury typically adds 50% to prices making them unaffordable.
This causes a production /consumption crisis (now on the scale of 1912-14)
Google the late Margarit Kennedy to grasp this phenomenon.
She was close to the mark.
Oliver Heydorn however hits the spot.
The role of depreciation is vital to our understanding of economic waste and wasted effort in general
http://www.pennlive.com/opinion/2015/10/hillary_is_right_were_not_denm.html
A 60% top income tax rate plus a 25% national sales (VAT) tax ...
What's not to like?
Hillery/DeeBlazio, 2016!
Denmark is not the eurozone, btw. just saying
Now even construction people are starting to look hungry.
It's not only European small businesses.
In the crazy world of QE, Helicopter money is the only thing that can print recovery. Just give every US citizen 10k of freshly printed money (about the size of FED balance sheet) and behold the recovery. When inflation starts, hike rates to 4%. Or 20% if required.
How are the markets?
How are commodity prices?
What does the latest business survey say?
...... etc ........
Believing in supply side, trickledown economics we have laid waste to the global consumer.
How is the global consumer these days?
1) The once wealthy Western consumer has had all their high paying jobs off-shored. As a stop gap solution they were allowed to carry on consuming through debt. They are now maxed out on debt.
2) Japanese consumers have been living in a stagnant economy for decades.
3) Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day. Western demand slumped in 2008 and the debt fuelled stop gap has now come to an end.
4) The Middle Eastern consumers are now too busy fighting each other to think about consuming anything and are just concerned with saying alive.
5) South American and African consumers are busy struggling with economies that are disintegrating fast.
We keep looking in the wrong place.If a economy produces a economic surplus then yes you can print demand.
However you will change the nature of demand.
From wasteful conduit activities toward real bottom up demand signals
Zero hedge is exposing itself to ridicule again.
Taking the pharieses economic pamphlets as serious economic analysis.
http://quod.lib.umich.edu/cgi/t/text/text-idx?c=acls;idno=heb00963
Oh it's a credit crisis all right!
You can't imagine the numbers of customers I have that ask for credit because their client hasn't paid yet.
I'm not a bank! 30 days, that's it.
Every small company is dwoning in debt right now.