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Durudarshan - Investment Analysis

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Private companies borrowing from banks would create growth

Posted on April 8, 2016 at 4:40 AM Comments comments (7)
It is good enough that big corporations have borrowed from the Central Banks and grown, with spectacular profits, returning the borrowings and now having huge mounds of cash to their names.
Well, some of them were bailed out.

Now what seems to be lacking is the banks lending the money out to small companies and individuals,
for business requirements.

The E.C.B. seems to have created plenty of liquidity in the system, 85 Billion Euros a month currently.
But it seems there is something that needs to be fitted into the Maastricht Treaty.  At one time people complained that a clause permitting the E.C.B. print Euros had been forgotten.  Now under the directive of the ECB President Mario Draghi, the money is being issued, although perhaps only in the restricted purchase of asset-backed securities.  This needs to be extended to actual issuance of currency and electronic accounting of such currency issuance, to enable the banks actually lend it to cutomers with small borrowing requirements. 

Just imagine, if family owned businesses which need to upgrade or refurbish to create the modern ambience or install energy-saving technology for a better, more efficient operation, such as restaurants, were actually able to borrow the money they need, it would be good for all.  It would be good for the banks, and they could create the environment for interest rates to move upwards, which savers would appreciate.  This seems to be the part of the jigsaw of the worldwide economic Recovery that needs to fit in perfectly, and I imagine we could see the Recovery gather pace, and lead us all to Prosperity.   The additional pace will create the additional customers buying more and consuming more.  Just the movement will mean more travel, footwear, clothes, food, handbags, etc,etc.

It is upto the governments and commercial banks to issue the directives to encourage the banks to lend the money onto their customers.  The once bitten twice shy customers must be courted and encouraged to borrow.  Only then could you see the private sector grow.  They have to be given the confidence and assurance to borrow and grow their businesses. 

With that, perhaps we could see inflation start to move up again.

For Japan, it seems, they may have to start tightening their stimulus.

As an alternative, the government sector could start to issue a little bit more social security - that is the established way of feeding the liquidity into the markets.  It will all be for the good of each nation and their people.

I hope all the people in positions of power and influence read what I am saying, and see what they can do to help the world out to a greater common Prosperity for all.

Kind regards,
Durudarshan H. Dadlani

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