Is there any way to stop the contraction?
We built an economy based on manufacturing CREDIT CREATION and the profitability of products surrounding CREDIT CREATION. What the proceeds were spent on due to the credit creation was not important so trillions of dollars were misallocated and squandered. We are now left with a legacy of massive debt and revenues are evaporating as banks are no longer lending like before.
Why are banks no longer lending? Because there are few to lend who either qualify or desire....those that are qualified to borrow don't want to borrow and those that want money don't qualify. If you think about it, there are really very few ideas out there right now that are a satisfactory risk to borrow against.
From the WSJ:
Lending continues to slow as bankers and borrowers refrain from taking risks, a bearish sign for the economy. The total amount of loans held by 15 large U.S. banks shrank by 2.8% in the second quarter.
Last month, videogame sales plunged by a record 29% year over year and sales of consoles like Microsoft's Xbox 360 and Nintendo's Wii dropped 38%.
A 30-40% sales drop is HUGE....so is 20% for a major industrial.......
Enterprise Products Q2 revenue $3.51B vs $6.34B
Honeywell Q2 sales $7.6B vs $9.7B
Quite frankly, I am not sure what "economists" are looking at to justify any kind of turn around. If banks are not lending, we have very little economy left...especially if you factor government cut backs as well.