Ripple Effect

April 17, 2009 at 11:58 am (By Amba)

At The Glittering Eye, Dave asks a friend in the construction business how it’s going (the exact same thing I do to feel the pulse of the body economic) and hears a story of concussion waves of work loss pulsing outward from banks’ hunkered-down refusal to issue a perfectly routine performance bond.

It might be true that this is just a temporary situation and, once the shock has worn off, things will get back to normal, the appetite of banks and insurance companies for risk will increase, and the business activity that was supported by the willingness to take risks would come back again.

Or it may be true that we’ve been living with an unrealistically low perception of risk for some time that’s supported a similarly unrealistic level of economic activity. If that’s true, this may be the new normal and the coming times could be very hard, indeed.

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