Monday, June 1, 2009

Credit Relief May Not Last Long

The New York Times - The experience of being choked to death can concentrate a person’s attention. When the chokehold is removed, a feeling of relief, perhaps even of exhilaration, is to be expected.allowing a person to breathe may not be enough to restore him to health.

In that regard, 2009 is starting to feel a little like 1980.

Then, as in recent months, a sudden credit contraction choked off economic activity. When the credit squeeze eased, a sense of relief spread. Within a few months, consumer confidence leaped amid expectations that both employment and business conditions would soon improve.

The improvement came, but it did not last long.

When the current credit crisis was at its worst, even financially solid companies could not get short-term financing. Banks did not trust one another, and trade financing dried up. One result was a collapse in inventories, as imports sagged even more than final demand.

Now, thanks to government financing of debts as diverse as mortgages and commercial paper, credit is more readily available. That should provide a lift to orders and at least a temporary boost for countries, including China and Germany, that rely on export marketshttp://www.nytimes.com/2009/05/29/business/economy/29norris.html

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