Bush's Speech and Business Credit

Well, for a government interruption of television, tonight's speach by George Bush was remarkably short. I'm going to look at a small section of it where he was speaking about business and credit.

President Bush talked about how business needs credit. I've heard some people express confusion at that piece of information, but it's quite true. Many businesses have boom times and bust times. The easiest example of that is in a farm. Specifically, let's look at a strawberry farm. A strawberry farm needs to maintain it's plants, fertilize them (organically or otherwise), keep them free of weeds and other pests, and then harvest them when the berries are ready. It is only once the berries are harvested that the farm makes an income. However, it needs to be paying salaries and costs for the rest of the year.

How do they do so?

Quite often, credit fills that gap. Ideally, the farm would make enough profit to carry it forward between years, but if the farm is in its first year, or if there was a drought, bad harvest or some other calamity, credit will pay the bills until the harvest can come in.

While farms are easiest to use as an example, many businesses have similar cycles. Retail does best over the holiday season in December. Recreational parks will often do best in the summer.

On the consumer end, many people use credit to purchase cars, small appliances, and to fund home renovations. These purchases keep the businesses that provide the goods and services afloat. While mortgage issues were a trigger behind the current financial environment, "good" credit is a strong support to the economy.

While opinions are mixed on what the fate of Wall Street businesses should be, the threat of difficult credit is a real one. Even in Canada, with the US being one of our largest export markets, a shortage of credit can harm our exports and impact our jobs and lives here. So, tragically we are not immune to the potential impact of problems south of the border. Whether anyone understands the true nature of these problems is still unknown, but they are ones to which we should be paying attention.

TAGS: Credit Crunch, Financial Crisis, President Bush

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