The blog has moved

by Paula | 26 June 2010 | permalink | comments
Tags: personal,

Hey all, please take note — the blog has moved to rabbit-mountain.com.

I’m slowly porting over the articles one by one, so if you click an archive link that takes you to Rabbit Mountain, don’t be alarmed.

home » A small-business bubble?

A small-business bubble?

by Paula | 20 May 2009 | permalink | comments
Tags: credit, entrepreneurship

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WSJ is reporting a thaw in SBA-backed small business loans, which have evidently seen a pretty significant uptick in secondary market sales. This, in spite of the fact that the SBA has missed deadlines both for getting a new secondary market up and running, and for setting out regulations “on lending to broker-dealers in the secondary market for SBA-backed loans.”

I’m sure this has a lot of people breathing a sigh of relief, but the good Dr. Cornwall throws a wet blanket on the good news:

I see two possible outcomes once the SBA gets its act together. Neither are particularly encouraging and they are not mutually exclusive.

One outcome would be the flood of small business lending that the administration wants. That will inevitably lead to a small business loan bubble that will surely pop sometime in the not too distant future. Too many small businesses will be given loans that they cannot afford. The SBA programs often put social agendas ahead of economic ones, just as we saw with the home loan disaster fueled by government meddling in those markets.

The other possible outcome is that the bureaucratic complexity will bog down SBA programs,adding nonproductive costs to the lending process.

Emphasis mine.

A small-business bubble would be absolutely fucking disastrous. Imagine this: what’s happened with the housing market happens to mom-and-pop businesses, new startups, and small service providers.

Even worse, as the US attempts to get its manufacturing feet underneath it again, a bubble would cause a big bloom of small producers only to see them implode, taking down with them the few existing small manufacturers still in operation.

A small business crash would be a stake through the heart of whatever remains of the US economy after the current crisis finishes its work, as well as through “buy local” and relocalization efforts happening at the community level. It would also crush every last community currency project that depends upon easy conversion to federal reserve notes.

Short of a full-blown transition to gold, silver, and nationwide alternative currencies I don’t see how any small businesses could escape the effects of a small business bubble, even if they did not have any SBA or other loans on their books. This is the crappiest thing I can imagine. Really.

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