And with CIT out, this just might be the harbinger of worse to come:
Business bankruptcy filings jumped in October, reversing two consecutive months of declining commercial filings and indicating that bankruptcies could continue to rise as the economy struggles to stabilize.
Last month, 7,771 businesses filed for bankruptcy protection, compared to 7,271 that sought shelter from creditors in September, according to data from Automated Access to Court Electronic Records, a private firm that tracks bankruptcy filings.
After two months of decline, the 7% rise in commercial filings shows that businesses are still struggling to access financing and are facing weak demand for their products.
With CIT’s bankruptcy, businesses will find it even harder to obtain financing and that will start a cruel cycle.
There would have been a role for government here if Obama hadn’t already shot his bolt with TARP and the Spendulus boondoggles. You see, the government can, at times (and only for short times) provide some much needed liquidity to small and medium sized business who have solid products, but are having trouble staying afloat or getting launched in an economic downturn. The key here is to understand that if someone isn’t making, mining or growing something, then there’s no point getting involved, at all, in such times. Obama shoveled all the money at entities which just shovel money around…it made their books look good for a quarter, but it didn’t produce any wealth. And as the money was borrowed against the future, Obama’s programs actually made us worse off.
But for those companies that do something useful (grow food, make tools, mine for copper, etc, etc, etc) then its in our best interest to help out as much as we can. This is because wealth isn’t money – money is just a convenience…easier to carry around a $20 to buy your lunch than provide your skills or goods at the local fast food joint, you see? Money can come in handy, but only if its to be used to allow people to exercise their skills to create wealth. Don’t bail out a bank (which only got in to trouble because the people running it got greedy and stupid), but you can send a few bucks to the landscaper who needs to purchase a new truck but can’t get financing in a tight market.
Even so, of course, such interventions are not ideal – and should be given sparingly and terminated as swiftly as possible – but they can play a role in economic stablization and as they result in things being made, mined or grown, we actually have more wealth…wealth which can, of course, be used to pay back the money provided to get things rolling. Right now, the economic wizards are stirring a pot of toxic assets and hoping that recovery emerges from the stew. Ain’t gonna happen. In fact, with all of Obama’s borrowing, we’re just being buried deeper…and more firms won’t get financing (because Obama borrowed it all, you see?) and thus will go under or not get started and this will, in turn, cause more firms to lose financing, etc.
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