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frodo
12-16-2008, 02:46 PM
I heard a whisper from some people in the know yesterday about the next big "problem" facing the Australian economy, so I guess it's already a problem in the American economy.

The problem is that banks are not renewing the commercial loans or overdraft facilities that a lot of businesses rely on for working capital. For the record, this is the money that finances inventories and business to business credit.

I know something about this having watched several perfectly adequate businesses get destroyed in the last recession when their credit providers pulled the rug from under them in one day - giving them 24 hours to repay their loans or else sending them into administration.

Now at that time, the Government did nothing, since part of the problem at the time was the necessity to "break' a few businesses in order to break union power.

But this time around it's different. It's not wages growth that has caused the financial meltdown, far from it. My take therefore, is that the Government is going to have to "encourage' banks to make commercial loans and extend overdrafts, etc. early next year - which is when the problem is going to appear, according to what I've been told.

I'm lunching today and again on Friday with some of the powers that be, and I will inject this subject into the conversation if possible and report back.

Should this be allowed to happen, then those businesses that survive will go into "cash is king" mode and that will guarantee a more severe recession.

BirdGuano
12-16-2008, 03:18 PM
I heard a whisper from some people in the know yesterday about the next big "problem" facing the Australian economy, so I guess it's already a problem in the American economy.

Indeed, this has just been gathering momentum since about October and is crashcading along picking up speed.

It has already affected two of my largest customers (>$1billion USD revenue) and is messing with their JIT supply chain.

sandyd
12-16-2008, 04:34 PM
Should this be allowed to happen, then those businesses that survive will go into "cash is king" mode and that will guarantee a more severe recession.

Soon, you might use the 'D' word.


Instead of gov loaning or giving money to banks....maybe gov needs to go straight into business giving loans.....

I know that's not pure capitalism but I flat out don't care. I have issues with people starving around me....or worse...ME starving....

Malcolm
12-16-2008, 04:58 PM
I heard a wisper that large construction companys in Australia are not looking any further ahead than completion of the jobs they are on now.

penguinzee
12-16-2008, 08:13 PM
I can speak on an "unofficial" note that this is already happening with smaller businesses... the company I work for has been doing very unusual belt-tightening lately, not just because business is slow, but is also trying to cut costs to the bone. First sign was back in September, when the computers we were supposed to order for our department were scotched. Then the layoffs, much deeper and cutting key personnel (so far, not including me). Then the shortening of the work week to 4 days for EVERYBODY. Now, the catalog that we produce every year (our biggest, and best sales tool we have) is being put back, and may not even be produced, because there is no money to print with. Add to that, even supply inventory is being questioned heavily-just this AM, they were questioning whether we can return a gallon of ink (worth ~$100) for credit against our bill with the ink manufacturer. Our bank is shall we say, a VERY large American bank-wouldn't be the least bit surprised if they yanked our credit line (I'm guessing it's around $100k) and the owners aren't telling us. In all the time I've worked there (9+ years) I've NEVER seen the kind of cutbacks they are doing now-it reeks of panic at the executive, to say the least.

Tomorrow's "Christmas" party should be interesting...

Franc (penguinzee)

BirdGuano
12-16-2008, 08:33 PM
Pen with those warning signs, I wouldn't be surprised if you showed up one morning soon and the doors were padlocked.

Sorry.

CanadaSue
12-16-2008, 08:33 PM
If I were attenbding that party, I'd surely have my eyes & ears open.

penguinzee
12-16-2008, 08:58 PM
Oh trust me, I'm VERY aware of the situation, gang, trust me...:beer:

Been seeing "something" coming along since the computer order went poof, and put more money aside just for "something"... the big trouble is where would I go from here? I do have some irons in the fire, just not sure they will be hot enough in time, or if the fire is lit... the other problem is that while I'm pretty much "indispensible" on the job, doesn't mean I'll be able to catch on easily elsewhere...

Gotta stay flexible (advice I gave on another thread), flexible, flexible...:yes:

On a side note from another forum, some members there noticed Costco wasn't fully stocked with the basics like they usually are-assuming this is true, has anyone here noticed that? I noticed the same thing at WallyWorld last week... wonder if this is related to the topic of this thread?

Franc (penguinzee)

BirdGuano
12-17-2008, 04:12 PM
Gotta stay flexible (advice I gave on another thread), flexible, flexible...:yes:



Semper Gumby

Always Flexible :D

Renegade
12-17-2008, 04:39 PM
:funnypost:

ltow
12-17-2008, 10:16 PM
Costco wasn't fully stocked with the basics
gotta say the Sam' Club I frequent was stacked to the CEILING with stuff these past few weeks.

I thought they were preparing for people coming in with govt rebate checks or something - I had never seen it so well stocked before.

Fiddlerdave
12-18-2008, 12:58 AM
Indeed, this has just been gathering momentum since about October and is crashcading along picking up speed.

It has already affected two of my largest customers (>$1billion USD revenue) and is messing with their JIT supply chain."Crashcading"! I like that. Quite desctriptive and appropriate.

California can't sell bonds, and is about to shut down massive and active construction projects of all kinds.

For many, it is not obvious to understand entirely what that implies, just understand it is as expensive as hell. And I will guess unemployment will go up a minimum of several percent in very short order. Dozens of large companies and far more small ones will just empty their buildings of workers, with a skeleton staff to pursue the lawsuits, if they don't go BK immediately..

Auburn Boy
12-18-2008, 01:08 AM
We've actually got several financial timebombs ticking..,

ALT-A loans. Variable loans to mortgagees of higher creditworthiness.

Letters of Credit are not being renewed for trade.

Commercial real estate collapse.

And uh..., imminent outlook for worsening unemployment.

Bleak, bleak financial times.

Auburn Boy
12-18-2008, 01:14 AM
Pen with those warning signs, I wouldn't be surprised if you showed up one morning soon and the doors were padlocked.

Sorry.

That is pretty much how my wife found out she was to join the ranks of th jobless..,

Four P.M. Dec 12 2007: Phone rings in office. "Hello." "This is the county manager. Tell all your employees to collect their personal belongings. At 5:30 the locksmiths will be there to change the locks. The company is closing it's doors for good."

End of story..,

sandyd
12-18-2008, 12:08 PM
The COUNTY did that last year AB?


wow....

penguinzee
12-18-2008, 08:32 PM
Yeah, the x-mas party was a joke-all the gifts (I refused mine) were "samples" from our vendors-most of them were cheap tote bags! I didn't need a tote bag...

On the more positive side, we've suddenly got a surge of work, enough to get us all into work tomorrow... so Christmas will happen at the home this year, after all (though not too big!)

Franc (penguinzee)

leistb
12-18-2008, 08:40 PM
Yeah, the x-mas party was a joke-all the gifts (I refused mine) were "samples" from our vendors-most of them were cheap tote bags! I didn't need a tote bag...

On the more positive side, we've suddenly got a surge of work, enough to get us all into work tomorrow... so Christmas will happen at the home this year, after all (though not too big!)

Franc (penguinzee)

Merry Christmas, Franc!

frodo
12-19-2008, 11:38 AM
As planned, I raised the subject at lunch yesterday at a table filled with bankers after we had finished our red and before we got to the Port.

The response:... Dropping interest rates close to zero is a stupid move because no one is going to park money with you if better returns can be had elsewhere. This is going to make the working capital problem worse, not better, and it is a problem.