Bottlenecked Flow of Credit Inhibits Growth

The amount of credit that is flowing to the companies operating in America is currently drying up at a pace that has not been seen in over decades, the ramifications of which threatens the creation of new jobs and the expansion of established businesses, an issue that is magnifying the worries of several economic experts that the economy is truly in the middle of a recession.

When combining the value of the two sources of credit that lead the nation, short-term loans called “commercial paper” and outstanding industrial and commercial bank loans, you’ll find that this value peaked last year at about $3.3 trillion dollars around the month of August. This information comes from the Federal Reserve, which published a report at the time. For the rest of 2007, that value dropped down to around $3t, which is almost a plunge of about 9%

The Federal Reserve has been tracking these figures since 1973, and not once has the financial arteries of credit constricted in such a rapid fashion. Smaller declines have occurred, but never with such forcefulness. Truthfully, this is what has lead to the current economic stagnation in America, and while the circumstances certainly haven’t devastated the economy, they have nonetheless caused a ripple effect that has affected every sector.

With some markets showing promising signs of growth, the credit trend looks capable of reversing itself given some time, but economic analysts and financial gurus are hesitant to say that the economy will bounce back in 2008. Indeed, they’re looking at 2009 before real positive changes occur, and in the meantime Americans are left having to cope with high gas prices and expensive food products while inflation continues to have a resounding impact on the market stability.

Times are tough, but it is generally believed that things are no where near as bad as they could have been, so a sizable number of optimistic people continue to believe that things will get better in the future both in regards to the credit crunch and the financial conditions for the average American.

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