Another Day, Another Financial Crisis

So Wall Street has gone careening into an iceberg, a few more banks decided to close their doors, whether you agree with it or not the government isn’t going to bailout the banks (at least not yet, I doubt we’ve seen the last of that proposal), and now multiple states are having fuel shortages due to the hurricanes in Texas. I doubt you could ask for a better recipe for disaster.

My first thought is that if there is fuel shortage in one area of the country it’s only a matter of time before it affects a larger area. Supplies have to be diverted from one place to another and that small pocket of suffering is going to expand outward. Diesel fuel (for truck deliveries) shouldn’t be affected for some time, but consumers will be hit directly. You can read dozens of reports of people waiting in line for hours, flared tempers and some cases of rage that have broken out. For the Southern states already feeling the gas crunch, people are staying home whenever possible, and are spending more time in gas lines that grocery lines. It’s only been about 2 weeks, but you can already read the dozens of scathing commentary from citizens left without gas.

When gas was spiking over $4 a gallon businesses felt the hit as people had less money to spend on other goods and had to budget much more for gas. While it isn’t any cheaper scarcity is now an issue. Not only do people have to budget for the cost of the gas, but they have to actually plan their trips or cancel them so they can get by with the limited fuel they have. Convenient trips to the store are going to have to wait and I’ve read where school sports have been cancelled because parents can’t afford to make all the extra trips to practice and games.

Not to mention that banks are starting to collapse people are going to be even more concerned with how they spend their money or if it’s even secure. Although we aren’t quite to the point of massive runs on the bank, I do see that people will be moving money around to protect themselves and cut their losses. No, I don’t think they will simply remove money from the banks and stuff it under their mattresses, but I do feel people will be much more frugal in what they spend their money on. If anything people may actually start to act like we’re in a recession; less trips, more cooking at home, buying in bulk.

The other part that has me concerned is how this whole bank fiasco will affect small business. And on the other side of the coin, how they are going to treat those of us who used to be in business but now owe them money. As I mentioned before Bank of America ended up buying out my debt and the interest rate has been increasing ever since they did. Now that they have a whole slew of worthless paper, I wonder if they will continue to keep raising the rates. They seem to have bought up more debt than what financially makes sense. I’m fearful that in order to try and get a quick influx of cash they may make the payment schedule and interest rate unmanageable. Then again, if they aren’t going to get bailed out by the government maybe they will be a little more reasonable. It’s no secret, I don’t like Bank of America, I never asked to be a customer of theirs and I certainly don’t trust them.

But the other part is what will small business owners do for loans? I doubt anyone is going to be too anxious to hand out loans or working capital. If some stores are struggling from a slow summer (not just MA) and they need a few bucks just to make it through the holiday season are they going to be able to float a loan?

It seems the financial problems are coming to a head. For most small businesses that usually rely on the 17-22 year old crowd for help, it seems they aren’t going to be able to pay enough for them to come to work, or they are going to have some hard times paying potentially higher interest rates from the bank or larger minimum payments. At the very least I don’t see new businesses getting a lot of help when it comes to purchasing new equipment or expanding their endeavors. Of course this leads me to wonder how new franchise owners who are in the middle of the build out process or are just about to start are going to be able to complete their plans. The uncertainty of getting the store open and then the uncertainty of whether the customers will even show up at the door would have me under a great deal of stress right now.

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