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The Bad 

Who wrote this tired sea song set on this peaceful shore?  I think you’ve heard this one before…

~ Steely Dan

As mentioned, at least for the small business community, availability of credit has not been a key fundamental issue in the current cycle. In fact, their number one issue of concern for years has been lack of final demand.

Personally, I believe the experience of the small business community is simply a microcosm of the larger domestic and global macro. Subdued final demand IS the key macro. Is this why we see a growing gap between small business perceptions of credit availability and actual capital spending? Probably. The credit is there, but actual final demand that would support credit expansion is not. Hence the current cycle divergence in what has been a very tight data series correlation between credit and cap spending historically.

Of course this is a segue into a broader dark cloud of the current cycle that is private sector credit expansion, or more correctly, lack thereof relative to historical experience.  When we listen to pundits speak of the economy potentially reaching “escape velocity”, they are of course referencing prior economic cycle growth results, aided and abetted by prior credit expansion that is now lacking. This is perhaps most dramatically seen in the rhythm of banking system credit, in the change in actual loans and leases outstanding.

As is clear in the chart below, never in any expansion cycle of the last four decades at least has banking system credit not grown in double-digit territory until…