The Small Business Administration reports that losses are rising. Last year, the SBA had to take back $2.1 billion in loans that it had guaranteed. This year, it looks like the total will be higher.
Normally, small businesses lead the economy out of recession. But this is no normal recession. This is a depression. And small businesses are getting crushed. An AP report says small businesses are not bouncing back as hoped.
Part of the phenomenon can be explained merely by the severity of the downturn. If this were a recession it would be a bad one – worse than any since the Great Depression. Consumers have rediscovered thrift. Households are cutting back. They do this by eliminating things that aren’t necessary. Small enterprises often provide things that people don’t really need to have.
Another explanation involves the feds’ response to the slump. Never before have they fought so hard to avoid a capitalist correction. But in their efforts to bailout Wall Street they not only ignore the side streets and back alleys where small businesses operate, they actually take away money from what might be called the small business economy in order to pay off their friends on Wall Street.
This is how you put the ‘great’ into a Great Depression – by depriving the small business sector of the capital and freedom it needs to innovate and grow.
for The Daily Reckoning Australia