Credit is harder to come by now.

While I think there were a number of other factors contributing to the credit market crisis and the current economic recession, this is good illustration of a few of those factors.

At first, when I heard that the government is considering to buy so-called “commercial paper,” my reaction was rage. But I’ve calmed down and thought things through a little bit. This might be a needed action on the part of the Fed.
But first, a brief tutorial:
Commercial paper is basically an unsecured loan that businesses make to each other. It’s like when you get out the credit card toward the end of the month to smooth things out as they get a little tighter. Basically, a company says, “I need $500 million to make payroll this week, but income has been …read more

Right now, economists and others are worrying about the continuing credit market squeeze. Indeed, they are very worried about the fact that lenders continue to tighten their standards for mortgages and consumer loans. The Federal Reserve says that domestic banks are making it harder for people to get all sorts of loans.
The result? Less access to credit will result in lower rates of consumer spending. MarketWatch reports regarding the credit market squeeze:

“This is consistent with our view that consumer spending will slow markedly over the next several quarters,” wrote economists for Lehman Bros.”

“The impending tightening may ultimately …read more